Israeli Families See Wealth Grow 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, despite a decline in housing prices. The Tel Aviv 35 stock index rose approximately 36%, while provident and study funds (Keren Hishtalmut) saw double-digit returns, with some stock-focused funds reaching 18%-26%. These gains translated into substantial additions to savings, with a million shekels potentially adding 120,000 shekels, and 2.5 million shekels adding up to 300,000 shekels, before new annual contributions.

For families with existing financial assets, such as pensions, study funds, and investment portfolios totaling around 2 to 2.5 million shekels, the stock market alone could have added 200,000 to 300,000 shekels this year. This wealth accumulation is significant, as the total financial assets managed by institutional bodies in Israel exceed 3.3 trillion shekels, averaging over a million shekels per household before considering direct investments.

However, the housing market presented a counteracting force. National housing prices saw a decrease of about 1.5% compared to the previous year. In some regions, like the Central District, prices dropped by as much as 4.1%, and in certain cities or neighborhoods, actual transaction prices, including financing deals and discounts, may reflect declines of 7% to 10%. A 9% drop on a 2.4 million shekel property, for example, could erase approximately 216,000 shekels from a family's net worth.

Debt-related aspects also improved for some. The Bank of Israel's interest rate fell from 4.5% to 3.25%, and the prime rate decreased from 6% to 4.75%. This reduction in interest rates could save families with significant mortgages thousands of shekels annually. Additionally, average salaries increased by about 3.5%, outpacing inflation, which added hundreds of shekels monthly to household incomes. Despite these factors, the overall increase in net worth was heavily dependent on the proportion of a family's assets held in financial instruments versus real estate in declining markets.