Housing cost vs. income in Israel 1996-2012

August 28, 2013

Apartment prices in Israel have gone up significantly in recent years. In the years 1996 to 2008, an average apartment cost about 100 average salaries. Within two years, this ratio has gone up to about 130. This rise can be explained to a significant extent by the reduction in interest rates, which implies that a given mortgage payment can repay higher loans. The interest rate on an indexed 20 year mortgage has fallen from about 6% in the late 1990’s and early 2000’s to about 3.5% in 2010 to 2012. As a result, despite the 30% increase in apartment cost to salary ratio, the ratio of the monthly payment on a 20 year loan for the cost of an average apartment to the average salary has gone up much more moderately – from about 70% to about 80%.

housing-cost

The fact that the increase in apartment prices is associated with a decrease in interest rates raises the possibility that a future rise in the interest rates (which would bring them close to historical rates) would cause a return of the apartment cost to salary ratio to its previous level.

Data sources:

  • Average monthly salary (nominal): Social security data (social security law, section 1), similar to statistical abstract 2012, Table 12.34, but more up to date, using the January 1st 2013 entry as reflecting 2012 data, etc.
  • Consumer price index (CPI): Israeli central bureau of statistics (CBS), series 120010
  • Average price of apartment owned by its residents: CBS series 020000
  • 20-year mortgage CPI-indexed interest rate: Bank of Israel data, using the “20-25 years” column for recent years and the “above 20 years” column for pre-July 2011 entries

Co-authored with Daniel Gat.

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4 Responses to “Housing cost vs. income in Israel 1996-2012”


  1. […] post presents some additional time series regarding the matters discussed in a previous post. In addition to using the data used in the previous post, one additional series is used – […]


  2. […] apartment price-to-average monthly salary ratio remained stable at 100 from 1996 to 2008, but has surged to 130 in the past half-decade. According to the IMF, Israel’s home prices are now 25 percent above […]


  3. […] apartment price-to-average monthly salary ratio remained stable at 100 from 1996 to 2008, but has surged to 130 in the past half-decade. According to the IMF, Israel’s home prices are now 25 percent above […]


  4. […] apartment price-to-average monthly salary ratio remained stable at 100 from 1996 to 2008, but has surged to 130 in the past half-decade. According to the IMF, Israel’s home prices are now 25 percent above […]

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