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

Israeli households experienced a significant increase in wealth over the past year, primarily driven by strong performance in financial markets, according to a report. While the average checking account balance might not reflect it, the overall net worth of families has grown considerably. The Tel Aviv 35 stock index surged by approximately 36%, and pension funds and study funds (Keren Hishtalmut) saw double-digit returns, with some stock-focused funds reaching 18%-26%. For families with substantial existing savings, such as NIS 2-2.5 million in pensions and investment accounts, market gains alone could have added NIS 200,000-300,000 this year, before accounting for new contributions.

This growth is attributed to the substantial NIS 3.3 trillion managed by institutional bodies in Israel, which translates to an average of over NIS 1 million per household before considering direct investments and savings. For a typical middle-aged couple with over twenty years of saving, accumulating NIS 2 million or more in pensions and investments is a realistic scenario. These funds are diversified across stocks, bonds, and other assets, meaning most Israelis are indirectly invested in the stock market through their long-term savings.

The overall financial assets in Israel reach approximately NIS 7.25 trillion. However, the picture is nuanced. While financial assets grew, the housing market experienced a slight decline, with national prices dropping by about 1.5% year-over-year. This decrease could erase tens of thousands of shekels from a family's net worth, and in some areas, price drops of 7%-10% were observed, significantly offsetting investment gains for homeowners in those regions.

Additionally, household debt remains substantial, totaling around NIS 914 billion. However, the cost of this debt has decreased due to a drop in the Bank of Israel's interest rate from 4.5% to 3.25% and a decrease in the prime lending rate. A NIS 800,000 mortgage could see annual savings of NIS 3,000-4,000. Salaries also saw a modest increase of about 3.5%, outpacing inflation, adding a few hundred shekels monthly to household income. The report concludes that families with significant financial assets, particularly those not heavily concentrated in declining real estate markets, had a very prosperous year, with the bulk of wealth accumulation coming from investments rather than daily income or property value appreciation.