Israel's Inflation Drops to 1.6% in June with Significant Housing Price Decline

Israel's Consumer Price Index (CPI) for June 2026 remained unchanged from the previous month, according to data released by the Central Bureau of Statistics on Wednesday. Despite a 0.3% increase in the June 2025 index, the annual inflation rate fell to 1.6%, marking the lowest level since 2021. This decline had already influenced a recent interest rate cut, and no further rate reductions are expected at the next Bank of Israel meeting on August 31.

Price increases were recorded in culture and entertainment (up 1.0%), housing (0.7%), health (0.6%), and food (0.4%). Conversely, notable price drops occurred in fresh vegetables and fruits (down 5.2%), clothing and footwear (2.7%), transportation (0.7%), and furniture and home equipment (0.5%). Rent prices for tenants renewing leases rose by 2.6%, while new tenants faced a 6.6% increase, reflecting annual rent change trends despite most tenants being under fixed contracts without adjustment mechanisms.

Housing prices showed a sharp decline, with a 1% drop comparing transactions from April-May 2026 to March-April 2026, and a 2% decrease compared to the same period last year. This is the steepest short-term drop since December 2017-January 2018. Regional price changes from April-May 2026 versus March-April 2026 included decreases in Jerusalem (1.8%), the North (0.3%), Haifa (0.5%), and Tel Aviv (2.3%), with no change in the Center and South regions. Year-over-year, prices fell in the Center (3.2%), Haifa (2.6%), Tel Aviv (2.5%), and South (0.5%), while rising in the North (1.4%) and Jerusalem (0.3%).

New apartment prices declined by 0.1% month-over-month, with government-subsidized transactions increasing from 34.6% to 37.5% of total new home sales. Excluding subsidized sales, new home prices rose slightly by 0.2%. Year-over-year, new apartment prices fell by 3.9%.