Israeli Families See Wealth Grow Despite Housing Market Slump

Israeli families 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 surged 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.

This financial growth is particularly impactful for families with existing assets. The total financial assets managed by institutional bodies in Israel exceed 3.3 trillion shekels, averaging over a million shekels per household when distributed broadly, even before considering direct investments and cash. For a typical middle-aged couple with over twenty years of savings, accumulating 2 million shekels or more in pensions, study funds, and other savings is a realistic scenario.

However, the real estate market presented a counteracting force. National housing prices saw a decrease of about 1.5% year-over-year. In some regions, like the Central District, the decline was steeper at around 4.1%, and in certain cities or neighborhoods, actual transaction prices, financing deals, and discounts could reflect drops of 7%-10%. A 9% decrease on a 2.4 million shekel property, for instance, could erase approximately 216,000 shekels from a family's net worth.

Compounding the positive financial outlook, interest rates on loans decreased. The Bank of Israel's key interest rate fell from 4.5% to 3.25%, and the prime lending rate dropped from 6% to 4.75%. This reduction in borrowing costs offered some relief, especially for those with variable-rate mortgages. Additionally, average salaries rose by about 3.5% over the year, outpacing inflation, which added several hundred shekels monthly to household incomes.

The overall picture suggests that families with substantial financial holdings, particularly in stocks and funds, benefited the most. While housing market depreciation and vehicle value loss offset some gains, the significant returns from investments, coupled with salary increases and reduced interest payments, led to a notable rise in overall family wealth for many Israelis, even if this was not always apparent in their checking accounts.