Bad News for Homebuyers and Renters Alike

Housing Prices in Israel Are Climbing Faster Than Wages

Don’t let temporary dip in housing prices fool you.

Rising prices in Israel's housing market pose a heavy burden to homebuyers and renters alike. But while attention is mostly directed toward the hardships endured by homebuyers, renters find themselves in a similar bind if they live in the greater Tel Aviv area or the central region.

An analysis published on Sunday by the Housing and Construction Ministry on home construction in the second quarter of this year says that since 2007 average rent has risen from 30% of the average salary to 38%. Meanwhile buyers are faced with paying 135 average monthly salaries for an average-priced home, compared with 132 salaries last year.

The report, partially based on figures from the Central Bureau of Statistics, shows that the average rent in the first half of 2013 reached NIS 3,436 — 4.5% more than the average rent in 2012. The steepest increases were registered in Tel Aviv (6.8%) and Jerusalem (4%).

The report also shows that average rent in Israel has risen by 49% since 2008. Tel Aviv registered a 61% increase over the same period while its satellite cities and the Sharon region experienced a 53% increase. In outlying cities in the north and south of the country rents climbed more moderately, by around 40%.

Average rent for an apartment has reached NIS 5,117 a month in Tel Aviv, representing 56% of the average gross monthly wage; NIS 4,047 (44.5% of the average wage) in the Sharon region; NIS 3,770 (41% of the average wage) in Jerusalem; and NIS 3,570 (39% of the average wage) in cities surrounding Tel Aviv. In Haifa, however, rent is much cheaper — just NIS 2,312 a month, equivalent to 25% of the average monthly pay slip.

It should be noted that average salaries in the Tel Aviv area and the Sharon region are higher than the national average. But in any case the data shows that workers earning average or lower-than-average salaries are severely limited in their ability to rent in the more desirable areas.

Slight drop in prices

Buying a home continues to grow more onerous, according to the report: Prices are climbing faster than wages. In 2008 the number of average monthly salaries needed to buy a home was just 103 compared with 135 this year.

"It should be noted that the main reason the number of salaries needed to buy a home rose significantly in recent years is the fact that from 2005 to 2013 wages grew by just 3% in real terms while home prices rose by 44% in real terms — slightly higher than the growth in national product, approximately 42%, during this period," the report says. Average household income stood at NIS 12,345 a month in 2011 according to statistics bureau figures, with 92 average months of net household income required for purchasing a home.

The survey found that during the second quarter of this year housing prices slightly declined from the first quarter. The average cost of a home in the second quarter was NIS 1.22 million, 3% less than in the first quarter and 2.9% more after adjusting for inflation in the second quarter of 2012.

The average price of a new home in the second quarter was NIS 1.39 million, 10% less than in the first quarter and 0.9% more than in the second quarter of 2012. A used home averaged NIS 1.15 million in the second quarter, 0.8% less than in the first quarter and 2.2% more than in the same quarter the previous year.

Although the numbers showing a drop in prices from the first to second quarters may seem encouraging, Finance Ministry figures released in the last few weeks indicate that the proportion of cheaper units purchased over the past several months has risen dramatically.

Eyal Toueg