Israel’s New Land Price Index Shows a 25% Drop Since Rate Hikes Began

The Central Bureau of Statistics has officially launched a new annual land price index, which will now be published every June. The index is meant to measure changes in land prices in Israel while controlling for land quality and characteristics, because land is a major input in property pricing.

The index covers residential land sold in state tenders through the Israel Land Authority and in the free market. It excludes subsidized lottery-based housing schemes such as Mechir Matar. The CBS also separates land for high-density development from land for detached homes, and uses the same hedonic method it applies in the housing price index.

The data show that while land and apartment prices should move together over the long term, they have diverged sharply in recent years. Between 2004 and 2025, land prices rose about 3.5 times in nominal terms, much faster than apartment prices. In the short term, the swings have been far larger: land prices jumped more than 20% in 2020 and 2022, fell 31% in 2023, rose 15% in 2024, and then declined 5% last year. Overall, since the Bank of Israel began raising rates in 2022, land prices in Israel have fallen 25%.

The article says developers buy land based on expectations for sales up to five years later, so land prices reflect market forecasts and interest rates. A key example is the 2021 Sde Dov tenders, where developers priced in future apartment sales above NIS 60,000 per square meter, assuming low rates, rising home prices and a quick start to construction. After rates rose in 2022 and the housing market stalled, those assumptions collapsed, and a similar tender last year fetched land prices per housing unit that were 40% lower than in 2021. The author says the latest 5% drop suggests developers are not especially optimistic about future home prices.