Israel's Annual Inflation Hits Five-Year Low at 1.6% as Housing Prices Plunge

Israel's Consumer Price Index (CPI) for June remained unchanged compared to May, according to the Central Bureau of Statistics (CBS). The country's annual inflation rate has continued to decline following the recent interest rate cut, now standing at 1.6% over the past 12 months, marking the lowest level in five years.

Simultaneously, the housing price index, which is separate from the CPI, dropped by a full 1% during April and May 2026. This represents the sharpest monthly decline in the housing market since 2018. Regionally, Tel Aviv led the decrease with a 2.3% fall, followed by Jerusalem with a 1.8% drop. Other areas saw more moderate declines: prices fell by 0.3% in the north and 0.5% in Haifa, while central and southern districts experienced no change. On an annual basis, the general housing price index fell by 2.0%, with the largest decreases in the central district (3.2%), Haifa (2.6%), and Tel Aviv (2.5%).

Within the CPI itself, June showed mixed trends. Price increases were notable in culture and entertainment (up 1.0%), health (0.6%), and food (0.4%). Conversely, significant price drops occurred in fresh fruits and vegetables (down 5.2%), clothing and footwear (2.7%), transportation (0.7%), and home furniture and equipment (0.5%).

Regarding rental prices, pressure on Israeli tenants persists with stark disparities between tenant groups. Existing tenants renewing leases at the same property saw a moderate rent increase of 2.6%. However, new tenants moving into vacant apartments faced a sharp and dramatic rent surge of 6.6%, highlighting ongoing challenges in the rental market.