Israel's First-time Homebuyers Not as Young as They Used to Be

Lower wage earners increasingly squeezed out of property market in recent years.

Nimrod Bousso
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Nimrod Bousso

The “young couples” buying their first homes in Israel are not as young as they used to be and come from a better-off demographic than in the past, as side effects of the skyrocketing home prices in the country.

The country’s real-estate industry generally uses the term “young couples” to refer to first-time buyers. But data from the Bank of Israel indicates that this term may be less and less accurate.

In 2002, some 66% of 35-year-olds owned a home. As of 2012, that figure was 60%. In addition, the median age of first-time buyers increased to 32 by 2012, up from 30 in 2002.

These figures come from data published by the Bank of Israel on Monday looking into first-time homebuyers. The study found that buying a home became significantly more difficult for this demographic over the 10 years under examination, and that buying habits changed as a result.

Changes were spurred due to the increase in prices in general, as well as relative to first-time buyers’ salaries, it noted.

The price of homes being bought by first-time buyers increased 72% over this period. Most of the increase was from 2008 onward, when Israel’s housing prices took off.

The median income of first-time buyers increased by 63% in nominal terms over this period, while median income among wage earners in general increased by only 29%. This means that would-be buyers of lesser means were being pushed out of the market.

The research notes that the upper-middle class and upper class saw salaries increase at a faster rate than those of lesser means, particularly from 2007 onward.

However, even though first-time buyers came increasingly from the well-off classes over this time period, buyers in general saw their purchasing power erode when it came to homes. A comparison of median income versus median home price found that between 2002 and 2008, buyers found themselves better off – the median first home cost 5.1 years of the median first-time buyer’s free income as of 2008, versus 6.1 years in 2002. Yet that trend reversed course after 2008, jumping to 6.4 years – 77 months – by 2012. This means that home prices relative to income increased by 25% between 2008 and 2012.

The survey found that over the years, some 40% to 50% of buyers were in the top three deciles of wage earners, and another 40% to 50% were from the third to seventh deciles. The remaining 10% or so were from the bottom deciles.

First-time buyers also started buying larger homes on average – by an average of 10% per resident.

However, they also started moving further away from Tel Aviv. Home prices decline the further they are from Israel’s commercial center. In 2009, some 20% of first-time buyers were buying in the periphery. As of 2012, that figure was 25%.

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