Geography, income and housing prices in Israel

September 22, 2014

This article follows up on themes discussed here and here by adding data about the association between location and price and income. The data source for apartment prices is a multi-year data set of the Israeli Ministry of Housing and Construction. The data set tracks the average apartment price over time in 74 localities with a total population of almost 6 million. This sample of localities includes all of the large cities plus an assortment of smaller towns. Arab majority towns are not represented.

Between the years 2008 and 2013 housing prices in Israel had increased significantly. The average apartment price rose from about 100 monthly salaries in 2008 to about 130 in 2013.

price-2008-2013Figure 1

The location-associated data shows (Figure 1) that the price increase can be described well as a proportional increase of about 30% plus an offset of about ILS 200,000. The most notable outlier from the trend is Tel Aviv where housing became noticeably more expensive than would be expected by the national trend. (In this figure and below, circle area corresponds to the population of each locality.)

dist-2008-2013Figure 2

Figure 2 shows that, with the important exception of Jerusalem, distance from Tel Aviv is negatively correlated with the average apartment. The price drops rapidly close to Tel Aviv, and reaches a floor about 100 km away.

The 2008 price gradient of 0.85%/km in the vicinity of Tel Aviv becomes steeper, 1.3%/km, during 2013. This reflects the sharper price increase in Tel Aviv relative to that of nearby localities.

salary-priceFigure 3

Figure 3 shows the relationship between average income and average apartment price in localities. The national trend is a monotonically increasing, linear relationship over a range containing most of the population. The Haredi majority localities and Jerusalem, shown in green, are clearly above trend line while high income localities (above ILS 8,000) are generally below the trend line. Tel Aviv, again, is noticeably more expensive than the trend would predict.

The trend line intersects the x-axis at ILS 3,500 and its slope is 275. That is, each additional ILS of monthly salary above 3,500 is associated with additional ILS 275 in the apartment price.

Data sources:

Data 1, 2; R analysis script.

Co-authored with Daniel Gat.

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