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 Glickman

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%.