Gush Dan saw the highest house price increase during the year to Q1 2016, with prices rising by 11.7%. It was followed by the Northern district (9.5%), Qrayot Haifa (6.3%), Southern district (6.2%), and Haifa (5.9%).
Other districts that experienced moderate year-on-year house price rises included Sharon (4.6%), Center and Jerusalem Periphery Towns (3.9%), Jerusalem (3.8%) and Tel Aviv (3%).
The country’s most expensive is in Tel Aviv, where the average price of owner-occupied dwellings was ILS2,573,100 (US$667,428) in Q1 2016. It was followed by Jerusalem at ILS1,822,300 (US$472,680) and Sharon at ILS1,799,800 (US$466,844). Qrayot Haifa had the cheapest housing in Israel, with an average price of ILS959,200 (US$248,804).
Israel has experienced dramatic house prices rises in the past eight years (with the exception of 2011), despite domestic political uncertainty, security threats, and the global financial meltdown. In fact, house prices have risen by 102% (69% inflation-adjusted) from 2006 to 2015.
- The average price of owner-occupied dwellings rose by 4.1% (-0.47% inflation-adjusted) in 2008
- Property prices rose by 22.35% (18.15% inflation-adjusted) in 2009
- Property prices rose by 17.04% (14.16% inflation-adjusted) in 2010
- Property prices rose by just 0.04% in 2011, but when adjusted for inflation, prices actually dropped 2.39%
- Property prices rose by 5.82% (4.12% inflation-adjusted) in 2012
- The average price of owner-occupied dwellings rose by 7.38% (5.38% inflation-adjusted) in 2013
- Property prices rose by 7.21% (7.41% inflation-adjusted) in 2014
- Property prices rose by 5.99% (6.88% inflation-adjusted) in 2015
The main reason for the continued rise in house prices is the supply shortage, due to low construction volumes. Other factors contributing to the house price boom have included the central bank’s expansionary monetary policies, and the lack of alternative investment options.
“Real estate accounts for 19% of gross domestic product directly and another 13% indirectly,” says Elli Kraizberg, a professor at Bar-Ilan University. “Real estate accounts for not less than 40% of the public’s total wealth.”
Nationwide house prices are expected to continue rising in coming months, amidst strong demand, coupled with the housing supply shortage.
The economy is expected to expand by 2.8% this year, after growing by 2.6% for both 2014 and 2015, 3.3% in 2013, 2.9% in 2012, and 5% in 2011, according to the Bank of Israel. The Bank of Israel kept its benchmark interest rate at a record low of 0.1 in May 2016, in an effort to boost economic growth while maintaining price and financial stability.
Analysis of Israel Residential Property Market »
This tends to support the popular view that property is somewhat overpriced in Israel.
Apartments in upscale residential areas of Tel Aviv cost on average US$ 11,500 per square metre (sq. m). A 120 sq. m apartment now costs around US$ 10,700 per sq. m., whereas three years ago, it only cost around US$ 7,800 per sq. m.
These are the sort of prices that can be seen in Swiss cities of Geneva and Zurich, or in Canada’s Toronto and Vancouver.
Renting an apartment in Tel Aviv would cost you anywhere from US$ 21 per sq. m. per month to around US$ 28 per sq. m. per month, which means that you can rent an 80 sq. m. apartment for about US$ 2,250 per month, and a 120 sq. m. apartment for around US$ 2,800 per month.
Capital Gains: Most properties sold in Israel are exempt from capital gains tax. If the gains are taxable, the net gain is taxed at the standard income tax rates.
Inheritance: Israel has no inheritance tax.
Residents: Resident individuals are taxed on their worldwide income and capital gains at progressive rates.
Then in the first quarter of 2016, Israel’s economy grew at an annualized rate of 1.3%, as slowing global trade weighed on exports, according to the CBS.
In Q1 2016:
- Exports fell by 1.1%
- Government spending dropped 1.6%
- Private spending grew 4.8%
- Investments in fixed assets rose by 16.2%
The economy is forecast to expand by around 2.8% this year, according to the Bank of Israel.
Israel’s unemployment rate fell to 4.8% in May 2o16, its lowest level since 1983, according to the CBS. Some economists believe this to be the “natural rate of unemployment.” The country’s unemployment rate has been generally declining since 2003.
“The jobless rate is not only low historically but low by international standards, and by conventional economic definitions there’s no unemployment at all in Israel,” said Moti Bassok of Haaretz.
Wages have been rising at a 5% annual rate since the beginning of 2016. Currently, the average monthly wage in Israel stand at ILS10,128 (US$2,645).
Inflation was -0.8% in May 2016, from -0.9% in April, -0.7% in March, and -0.2% in February, according to the CBS. Inflation stood at 0.6% in 2015, up from 0.5% in 2014, but down from 1.5% in 2013, 1.7% in 2012, and 3.5% in 2011, based on figures from the IMF.
In 2015, the country recorded a budget deficit of ILS24.5 billion (US$6.25 billion), representing just 2.15% of GDP – the smallest deficit since 2007, according to the Finance Ministry. The budget shortfall is expected to fall further to ILS14.1 billion (US$3.7 billion) next year.
Israel’s net public debt was equivalent to 61% of GDP in 2015.