House prices keep soaring, marking record 20.3% rise in a year

House prices across Israel set new records in October, with an increase of 20.3 percent compared with October 2021, according to the latest figures released Thursday by the Central Bureau for Statistics.

This means that during October, prices increased by a further 1.2% across both new and secondhand home sales.

The rise was especially felt in the northern and central regions, where the figure was 22.5%.

The data also showed that the number of homes changing hands has radically decreased, to levels not seen for the last 20 years. In Tel Aviv, the volume of property sales fell by 84% on levels from the previous October.

The steady rise in interest rates over the last six months — from 0.1% to 3.25% — is intended to help rein in housing inflation, increasing the costs of home ownership and reducing the size of loans available.

Inflation for the year to October has been calculated at 5.1% by the Bank of Israel, outside the recommended limits of 0.1% to 3%. The bank has already indicated that it expects to continue to increase interest rates for some months to come, until inflation is back within its target range.

There are signs, however, that some economic pressures are easing. November saw a reduction of 0.2% in the index for raw materials used in residential construction, and no change in the index that applies to commercial and office building. This directly impacts the prices for new housing, whose final cost is calculated in part based on changes in the cost of materials.

However, the agricultural input index — which influences food production costs — went up by 0.3%, and the consumer price index (CPI) overall rose slightly by 0.1% in November, driven by rises in the costs of housing, home maintenance and food. This is the lowest increase seen in the last three months.

Fresh fruit and vegetables went down in price, by 4.3%, and footwear and furniture also decreased in price by 1.5% and 0.3%, respectively

Since the start of 2022, the CPI has risen by 5.0%.

Average salaries have also risen, with the average monthly salary standing at NIS 12,285 ($3,570) in August, the last month for which data is currently available. This marks an increase of 4% from August 2021, but fails to match the general rise in prices and in particular the rate of increase in house prices.