The home price index of the Central Bureau of Statistics released on Friday fell for the fourth successive month, but in fact, in many cities in Israel, prices actually rose in the second quarter. Analysis by "Globes" reveals that the Israeli real estate market is undergoing changes that are not quantitative but structural. The middle class is abandoning the market, and the proportion of buyers of luxury homes is rising.
The result is that in several cities in the Tel Aviv region, the region that registered the largest price falls according to the Central Bureau of Statistics, prices of homes bought in the second quarter were actually higher than in the first quarter.
According to the Central Bureau of Statistics, home prices have fallen by 1.3% within four months. In general, the average price of a home in Israel fell by about NIS 30,000 in this period. The district that led the falls was Tel Aviv, where the falls reached the significant level of 4.2%, which in cash terms translates into NIS 145,000 slashed from the average price of an apartment bought in June in comparison with a similar apartment bought in February. This in fact the most important district, and it pulls the whole index downwards, since in other districts there were tiny falls, or even rises.
In Jerusalem, the price of an average apartment fell by NIS 15,000 in this period, or 0.5%. In the central district, the fall was 0.4%, or an average of NIS 11,000, while in the south the fall was just 0.3%, amounting to a few thousand shekels only. In the Haifa district, on the other hand, the price of an average apartment rose by NIS 42,000 in this period, or 2.3%. In the northern district, prices rose by a negligible 0.2%.
Tel Aviv market uneven
Despite the significant decline in the home price index, prices of apartments bought in Tel Aviv were actually 5% higher in the second quarter.
Examination of the prices of three- and four-room apartments, which represented three quarters of all deals struck in Tel Aviv in the second quarter, shows that the price of a three-year apartment bought in the city rose by 8% to an average of NIS 3.9 million, while the average price of a four-room apartment rose by 6% to NIS 5.2 million.
In order to understand the phenomenon, it is necessary look at the general picture in the Tel Aviv market, where the number of transactions has dwindled recently. In the second quarter of this year, 997 apartments were bought in the city, 23% fewer than in the first quarter, and 32% fewer than in the final quarter of 2024.
As "Globes" has previously noted, there was a steep decline in the number of transactions in the desirable Rova 3 and Rova 4 neighborhoods in the old north of Tel Aviv south of the Yarkon River (bordered by the Bavli neighborhood in the east and Hayarkon Street in the west, and by Bograshov and Shaul Hamelekh streets in the south), which dragged prices down in these neighborhoods.
But at the same time as the decline in the number of transactions and the price falls that have hit the "average" real estate market, it appears that buyers of luxury apartments have not abandoned the city. Israel Tax Authority data show that 44 homes in Tel Aviv were sold for NIS 10 million or more in the second quarter of the year, which compares with 42 in the first quarter.
It emerges then that the exit from the Tel Aviv real estate market is not even across all types of homebuyers, and, at least for the time being, buyers of luxury homes are not much affected by market conditions.
Record mortgages on luxury homes
To complete the picture in the high end of the market, we also looked at the Bank of Israel’s mortgage data. They strengthen the hypothesis that the real estate market is changing not just numerically, but also structurally, that is, in the identity of the buyers, and is gradually becoming mainly a market for the wealthy.
According to Bank of Israel figures, in the second quarter of this year, buyers of homes costing NIS 5 million or more took mortgage loans totaling NIS 3.6 billion. This is an all-time high; 26% more than the total of such mortgages taken in the first quarter, and 48% higher than mortgages taken on luxury properties in the second quarter of last year.
These figures too indicate that the wealthy are less hesitant over buying property, and continue to do so in fair quantities even though special offers by developers are drying up because of Bank of Israel restrictions.
Published by Globes, Israel business news - en.globes.co.il - on August 18, 2025.
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