Israel's Annual Inflation Rate Drops to 1.5% in July 2026 Amid Slight Housing Price Rise

Israel's Central Bureau of Statistics reported that the Consumer Price Index (CPI) rose by 0.3% in July 2026 compared to June, with an annual inflation rate of 1.5% from July 2025 to July 2026, marking the lowest level in five years. Key contributors to the monthly price increases included transportation (up 1.4%), culture and entertainment (up 1.1%), and housing costs (up 0.7%). Conversely, significant price declines were seen in clothing and footwear (down 4.6%), fresh fruits and vegetables (down 3.5%), and furniture and home equipment (down 0.7%).

The input price index for residential construction decreased slightly by 0.1% in July, with material and product prices falling 0.4% excluding labor costs. However, over the past year, construction input prices rose by 3.5%, mainly due to a 5.4% increase in wages paid to construction workers. Since the start of 2026, construction input prices have increased by 2.3%.

Housing price indices showed a marginal 0.1% increase between May and June 2026, with an annual decline of 1.5%. Regional variations were notable: Jerusalem and Haifa saw increases of 1.8% and 1.5% respectively, while peripheral regions like the north and south rose by 0.9% and 0.7%. In contrast, central districts including Tel Aviv experienced declines of 1% and 0.7%. New housing prices rose by 0.5%, while second-hand housing prices contributed to the overall decrease.

Regarding rent, tenants renewing leases faced a 2.6% increase, whereas new tenants experienced a sharper 4.7% rise in rental costs. These mixed trends highlight ongoing shifts in Israel's housing market and inflation dynamics.

The report underscores the complex interplay between wage growth, regional housing market variations, and sector-specific price changes shaping Israel's economic landscape in mid-2026.