Israeli Families See Wealth Grow Fueled by Investments, Despite Housing Market Slump

Israeli households experienced a significant increase in net worth over the past year, primarily driven by strong performance in financial markets, according to an analysis. The average Israeli family's wealth is calculated by summing assets like property, pensions, investment portfolios, and vehicles, then subtracting liabilities such as mortgages and loans. This past year, substantial gains in the stock market, with the Tel Aviv 35 index rising approximately 36%, boosted the value of long-term savings vehicles like pension funds, provident funds, and study funds. Returns on general track study funds ranged from 11% to 15%, while equity-focused funds saw returns between 18% and 26%. For example, a 1 million shekel investment could have yielded an additional 120,000 shekels before new contributions.

Collectively, institutional entities manage around 3.3 trillion shekels in pensions and savings, averaging over 1 million shekels per household before other direct investments. While wealth disparities are significant, a dual-income family in their 40s or 50s with over two decades of saving could realistically have accumulated 2 million shekels or more in these long-term accounts. The total financial assets held by the public have reached approximately 7.25 trillion shekels.

However, the real estate market presented a mixed picture. Nationally, housing prices saw a slight decrease of about 1.5% year-over-year. In some areas, like the Central District, prices dropped by around 4.1%, and in specific cities or neighborhoods, actual transaction prices and financing deals may have led to declines of 7% to 10%. A 9% drop in a 2.4 million shekel property, for instance, could erase nearly 216,000 shekels in value, significantly offsetting gains from financial investments for some households.

On the debt side, interest rates decreased, with the Bank of Israel's rate falling from 4.5% to 3.25% and the prime rate dropping from 6% to 4.75%. This reduction in borrowing costs provided some relief, particularly for those with variable-rate mortgages. Additionally, the principal amount of mortgages and other loans decreased over the year, further increasing net worth. The value of vehicles also depreciated, with some losing 10% to 20% of their value within a year.

Salaries also contributed positively, with the average wage increasing by about 3.5% while inflation remained around 1.5%. For a couple earning a combined 30,000 shekels gross monthly, this represented an additional thousand shekels per month. While some of this went to consumption, a portion was channeled into increased savings. Despite rising rents for some, the overall financial gains, particularly from investments, significantly boosted the net worth of many Israeli families, even if these gains were not always immediately apparent in their day-to-day checking accounts.