Average Apartment Prices Rise 7.9% Despite Overall Housing Price Index Decline in Israel

Israel's Central Bureau of Statistics (CBS) released housing market data showing a puzzling divergence: while the housing price index fell by 1.5% year-over-year in the second quarter of 2026, the average price of apartments sold rose by 7.9% to 2.435 million shekels. This discrepancy arises because the two metrics measure different aspects of the market. The housing price index is quality-adjusted, controlling for factors like location, size, and property features to reflect price changes for comparable apartments. In contrast, the average price is a simple arithmetic mean of all sales, which can be skewed by changes in the mix of transactions, known as "composition bias."

For example, a shift toward more sales in expensive cities like Tel Aviv, where the average apartment price reached 4.55 million shekels, compared to 1.24 million in Beersheba, can inflate the overall average price even if prices in each city decline. Regional data illustrate this effect: Tel Aviv's average price rose 11.8% year-over-year, while its quality-adjusted index fell 1.7%. Similar patterns were observed in Haifa and the Central District, where average prices increased but quality-adjusted indices declined. Conversely, in the Northern District, the average price dropped 1.8% while the quality-adjusted index rose 1.6%, reflecting more sales of smaller or cheaper apartments.

Additionally, the average price excludes government-subsidized transactions, which have increased their market share, while the index includes them, further complicating comparisons. New apartments, which are generally more expensive than second-hand units, also affect averages when their sales volume fluctuates. Moreover, the reported contract prices often differ from the actual amounts buyers pay after financing deals, discounts, and other incentives offered by developers.

The CBS notes that recent data are preliminary and subject to revision as more transactions are reported. The housing price index is published alongside the Consumer Price Index but is excluded from it since home purchases are considered investments rather than consumption. For buyers assessing market trends, the quality-adjusted index by region and apartment size offers a more accurate picture than average prices, which can be misleading due to transaction mix changes. The article emphasizes the importance of understanding these distinctions to avoid misinterpreting housing market data in Israel.