Israeli Housing Market Shrinks: 2 Million Shekels Buy Less Property Than Five Years Ago

A new analysis of 1,340 real estate transactions in six Israeli cities reveals a significant decline in purchasing power for 2 million shekels over the past five years. While still a substantial sum for most Israeli families, the size and number of rooms in apartments that can be purchased for this amount have decreased considerably.

The study, conducted by real estate appraiser Matan Lechiani, examined transactions in Haifa, Kiryat Yam, Kiryat Ata, Bat Yam, Petah Tikva, and Ramat Gan between 1.7 and 2.2 million shekels, comparing data from around 2021 to the most recent year. The analysis focused on apartments built after 2000.

Across all six cities, the same budget now allows for fewer rooms and smaller square footage. For instance, in Haifa, the average apartment size decreased from 112 to 99 square meters, and the average number of rooms dropped from 4.45 to 3.98. Kiryat Yam saw a reduction from 138 to 117 square meters and from 4.98 to 4.17 rooms. In Bat Yam, the decrease was even more pronounced, with apartment size shrinking from 92 to 61.5 square meters and the number of rooms falling from 3.6 to 2.72.

Industry professionals note that this trend forces buyers to compromise on size, often opting for three-room apartments instead of four, and accepting smaller living spaces. Location remains a priority for many families, who are willing to sacrifice apartment size for proximity to schools and infrastructure. Developers are responding by designing smaller units or creating four-room apartments with the square footage previously typical for three-room units.

When factoring in rising mortgage interest rates, the decline in purchasing power becomes even more stark. For example, in Petah Tikva, a buyer with the same financial capacity as in 2021 can now only afford an apartment 40% smaller. Experts suggest that a significant drop in housing prices, potentially around 24%, would be needed to return to 2021 price levels, and even then, the available properties might differ in type and size.