Construction Costs Surge 15.4% in Central Tel Aviv Over Past Year, Real Estate Appraisers Report
The Israeli Real Estate Appraisers Association released its June 2026 residential construction cost update, revealing widespread price increases across the country. On average, construction costs rose by about 3.2% compared to June 2025, with 54 out of 64 categories showing price hikes. Central Tel Aviv experienced the sharpest increase, particularly in low-rise buildings, where costs jumped 15.4% from 10,400 to 12,000 shekels per square meter within a year.
The report covers 16 geographic areas and four building categories, focusing on average apartment sizes of 85-100 square meters. In central Tel Aviv, the cost of constructing multi-story buildings rose by 5.8%, reaching 12,700 shekels per square meter, more than double the cost in lower-priced regions. Other parts of Tel Aviv also saw significant increases, with low-rise building costs in south and east Tel Aviv rising 6.7% to 8,000 shekels per square meter.
Chairperson Nahama Bogin emphasized the importance of regularly updating cost estimates to realistically assess project viability, noting that even small per-square-meter increases can translate into tens of millions of shekels for large projects. She attributed Tel Aviv's steep cost rise to extended construction timelines, limited working hours, logistical challenges, and unique municipal requirements. The report excludes expensive components like groundwater lowering, which is relevant in Tel Aviv.
Outside Tel Aviv, price increases were more moderate: Herzliya and Ramat Hasharon saw average rises of 4.8%, while Jerusalem remained relatively stable with a 0.8% increase. Some areas like Ramat Gan and Givatayim even experienced slight decreases in high-rise building costs. The report also noted nationwide cost rises in cities including Haifa, Eilat, and Beersheba.
Factors driving the cost surge include ongoing impacts from the "Iron Swords" conflict on the construction sector, labor shortages, increased reliance on more expensive foreign workers, longer project durations, and rising financing costs. Additionally, input price inflation, contractor insolvencies, and a growing gap between project starts and completions contributed to the trend. The association cautions that the estimates may vary by up to 10% and do not include indirect expenses such as infrastructure connections, VAT, planning, supervision, fees, overhead, or financing costs.
