Israeli Households See Wealth Grow Despite Housing Market Slump
Israeli families experienced a significant increase in wealth 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 study funds (kerenot hishtalmut) saw double-digit returns, with some stock-focused funds reaching 18%-26%. This growth in financial assets, managed by institutional bodies like pension funds and provident funds, added an estimated 200,000 to 300,000 shekels to the wealth of families with 2 to 2.5 million shekels already invested.
The overall financial assets managed by institutional entities in Israel amount to about 3.3 trillion shekels. When considering the roughly 3 million households, this averages over a million shekels per household before factoring in direct investments and savings. For a typical middle-aged couple with over twenty years of saving, accumulating 2 million shekels or more in pensions and study funds is a realistic scenario.
While financial markets boosted wealth, the housing market presented a counteracting force. National housing prices saw a slight decrease of about 1.5% year-over-year. However, this average masks significant regional variations, with some areas experiencing drops of up to 4.1% or even 7%-10% when considering actual transaction discounts. A 9% drop on a 2.4 million shekel property could erase approximately 216,000 shekels from a family's net worth, significantly offsetting gains from financial investments.
Debt burdens also eased for some. The Bank of Israel's interest rate dropped from 4.5% to 3.25%, and the prime rate fell from 6% to 4.75%. For a family with an 800,000 shekel mortgage, this reduction could save several thousand shekels annually. Additionally, the principal on mortgages and other loans is steadily being repaid, increasing a family's equity.
Salaries also contributed to increased household wealth, with the average wage rising by about 3.5% over the year, outpacing inflation. This translates to an extra thousand shekels per month for a couple earning a combined 30,000 shekels gross. While some of this increase goes to consumption, a portion is directed towards savings. However, rental costs saw an increase, with new leases rising by approximately 4.7%. The overall net worth of Israeli households is estimated at around 4.1 million shekels for a typical family, though this figure is heavily influenced by the performance of their largest asset, the home.
