Israeli Home Prices Rise 6.2% in 2015, Bringing 5-year Increase to About 30%

But Housing Ministry survey finds prices for new homes barely moved, while those for secondhand homes soared.

A new apartment block in the Neveh Sharett neighborhood in northeast Tel Aviv.
Eyal Toueg

Israeli home prices rose an average of 6.2% last year, bringing the average price nationwide to 1.42 million shekels ($365.7 million), an increase of about a third compared with five years ago, preliminary figures from the Construction Ministry released Sunday showed.

Secondhand homes rose especially quickly, with an average rise of 7.1%, while new homes showed an increase of 1.1%., the ministry said. It based its figures on prices in 110 towns and cities.

At about 2.6 million shekels, Tel Aviv had the most expensive homes on average, but prices rose a relatively modest 6.9% in 2015. Jerusalem prices rose a sharper 8.4%, bringing the average price last year to 1.94 million shekels.

The biggest increases, however, were for the southern cities of Ashdod and Be’er Sheva, where prices jumped 13.4% as hard-pressed buyers sought properties in places where prices were relatively low. Despite the double-digit increase, the average home in Ashdod changed hands for 1.4 million shekels in 2015 and just 937,000 shekels in Be’er Sheva.

The government has been struggling to put a lid on home prices, which have risen an estimated 70% since 2007 and, according to the International Monetary Fund, are 30% too high. But efforts by Finance Minister Moshe Kahlon and his predecessors have borne little fruit.

“I believe home prices will start to go down at the end of 2016, and I predict that by the end of 2017 they will have gone down by 15%,” Avigdor Yitzhaki, Kahlon’s points man for housing, said in an interview with TheMarker TV and the Knesset Channel. “If they don’t fall, as I am publicly promising, I will resign,” he vowed.

But the international credit rating agency Standard & Poor’s said in a report over the weekend that it doesn’t see the housing shortage that has fueled the price rise ending anytime soon. In any case, it warned that “any abrupt correction in house prices could still have other negative economic effects.”

The Central Bureau of Statistics and the Finance Ministry’s Appraisers Office conduct their own surveys. Each has their weaknesses; the Construction Ministry’s being that its sampling is relatively small and only gives a good indication of trends for the biggest cities.

The price rises, however, mostly passed contractors by. Prices for new homes actually fell in 18 towns, more than the number where secondhand prices fell. In the category of four-room houses, prices for new homes fell 0.3%, as against a rise of 6.4% of secondhand homes.