Home prices fell by 0.9% in 2025 according to the Central Bureau of Statistics.
The final index for 2025 showed a minimal decline, achieved after the three largest districts in the country pulled sharply in opposite directions. The home price index in the Tel Aviv district completed another quarter of sharp price increases, the Central District fell after several months of sluggishness, while the third largest district, Jerusalem, declined after several months of increases.
What are the main findings?
After two months of sharp and unexpected increases, the home price index fell again in the last index of 2025, although at a minimal rate of 0.1%, to bring the overall decline in home prices in 2025 to 0.9%.
Apartment tenants continue to pay for the lack of government policy in the field, which also contributes to the increase in the Consumer Price Index. It is better for tenants to remain where they are, because if they choose to move, they will absorb a higher rent increase than if they renew their contract.
Where did home prices fall the most?
Despite an impressive three-month increase, the Tel Aviv district recorded an annual decrease of 3% in the home price index; the second largest district, the Central District, saw a decline of about 4% in 2025. In contrast, the other four districts continued to record price increases, led by the Jerusalem district, which saw an increase of 5.4% last year; followed by the Northern District, which an increase of about 3% and the Southern and Haifa districts, which saw annual increases of about 0.5% each.
There are two main reasons for this. The first is related to home supply. The Tel Aviv and Center districts have the majority (55%) of the supply of new apartments, which makes buyers there much more powerful than in the other districts, which contributes to price decreases.
In Jerusalem, it’s a different story. This district is characterized by very unusual high-end deals. Last year, about 110 transactions were carried out in Jerusalem with prices of NIS 10 million or more. This is only a third of the number of similar transactions carried out in Tel Aviv, but considering the large socio-economic gaps between the two cities, the Jerusalem figure is considered an extreme exception.
It has come about due to the very large involvement of foreign residents who, since the outbreak of the war, have purchased hundreds of luxury apartments in the city, which has boosted the Jerusalem indices far beyond the way the domestic market has been operating.
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What types of apartments led the declines?
The declines were led by second-hand apartments. There is no index of second-hand apartments that summarizes the annual changes in these apartments, and the official new apartment price index of the Central Bureau of Statistics recorded a decrease of 2.7%. However, this index also includes homes sold in government subsidized programs, which constitute about a third of the new homes sold, and “pulls” them down. Based on the data on price fluctuations of new homes, excluding subsidized homes, it is possible to see an annual increase of about 1% in the market prices of new homes.
How is it possible that developers are having difficulty selling apartments and prices are rising?
In addition to the unique Jerusalem market, there is the issue of the developers’ financing deals, such as 20% now-80% on occupancy. Although these promotions hide price declines, the chief economist at the Ministry of Finance found that at the same time the developers are raising prices for those who choose to buy homes through these deals, which ultimately increases nominal prices.
What about apartment tenants?
The situation is not good either for tenants or the Consumer Price Index (CPI), of which the rent item constitutes about 25%. The housing services index, which is based on new contracts, rose by 0.4%. New apartment tenants and those who moved last month will be forced to pay an average rent increase of 5.8% compared with the previous rent that was charged on these apartments. In contrast, those who renew a contract in their existing apartment will pay only a 2.7% increase on average.
Does this have any significance for inflation?
Absolutely. Since the beginning of 2026, the price index has fallen by 0.1%, while the CPI excluding housing has fallen by 0.2%. In other words, the housing items, most of which are related to rent, have pushed the index upward.
Published by Globes, Israel business news – en.globes.co.il – on March 16, 2026.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2026.
