Israel’s July Inflation Rises 0.3%; Annual Rate Falls to 1.5% as Housing Prices Edge Higher

 Israel’s Consumer Price Index (CPI) rose 0.3% in July 2026 compared with June, in line with analysts’ expectations, according to data released Friday by the Central Bureau of Statistics. Over the past 12 months, the CPI increased 1.5%, down slightly from an annual inflation rate of 1.6% in June.

The July figures indicate that inflation remains relatively moderate, although several components of the index recorded significant price increases during the month.

Transportation costs lead July increases

The transportation and communications category recorded the largest increase among the major CPI components, rising 1.4%.

The increase was driven in part by a sharp rise in the cost of travel abroad, which increased 13.8%, while transportation services rose 2%.

The culture and entertainment category increased 1.1%, reflecting higher prices for books, hotels and guest houses, as well as cinema tickets.

Travel abroad and domestic flights increased 7.5%.

By contrast, clothing and footwear prices fell sharply, declining 4.6%. Clothing prices alone dropped 5.7%.

Fresh fruit and vegetable prices declined 3.5%, while furniture and household equipment fell 0.7%. Prices of fuel, vehicle charging and lubricants declined 3.6%.

Rents continue to rise

The housing market continues to show a mixed picture.

Rents for tenants renewing existing leases increased 2.6%, while rents for new tenants rose 4.7%.

The gap between the two figures highlights the continued pressure on households entering the rental market, with new contracts reflecting substantially stronger increases than lease renewals.

Housing prices return to modest growth

The latest housing price data showed a slight recovery after a prolonged period of annual declines.

Prices of new and existing homes increased 0.1% in May-June 2026 compared with April-May.

Despite the monthly increase, housing prices were still 1.5% lower than during the corresponding period a year earlier.

The national figure masks significant differences between regions. Housing prices rose 1.8% in Jerusalem, 1.5% in Haifa, 0.9% in the Northern District and 0.7% in the Southern District.

In contrast, prices declined 1.0% in the Central District and 0.7% in the Tel Aviv District.

On an annual basis, housing prices declined in the Central, Haifa and Tel Aviv districts, while increases were recorded in Jerusalem, the North and the South.

Prices of new homes increased 0.5% compared with the previous two-month period.

The share of new-home transactions conducted under government-subsidized housing programs increased from 36.4% in April-May to 38.4% in May-June.

Excluding transactions under subsidized programs such as the former Mehir LaMishtaken scheme, new-home prices increased 0.9%.

Nevertheless, the longer-term trend remains negative. New-home prices were 2.0% lower than in the corresponding period a year earlier.

Average home price exceeds NIS 2.4 million

Quarterly data released by the CBS show that the average price of a home sold in Israel during the second quarter of 2026 reached approximately NIS 2.435 million, an increase of 3.7% compared with the previous quarter.

Compared with the second quarter of 2025, the average transaction price increased 7.9%.

Tel Aviv remained by far the most expensive major market, with the average transaction price reaching approximately NIS 4.5 million during the second quarter.

Average prices also exceeded NIS 3 million in Herzliya, Ramat Gan and Jerusalem, reaching approximately NIS 3.5 million, NIS 3.07 million and NIS 3.05 million, respectively.

Ashdod recorded the sharpest annual increase among the cities examined, with the average transaction price rising 11%. Tel Aviv followed with an 8.4% increase, Haifa with 6.1% and Rehovot with 4.1%.

The largest declines were recorded in Ashkelon, where average prices fell 2.4%, followed by Bnei Brak and Netanya, both down 1.7%, and Ramat Gan, down 1.6%.

Construction costs remain elevated

The Residential Construction Input Price Index declined 0.1% in July to 103.5 points, compared with 103.6 points in June.

Despite the monthly decline, construction costs have increased 2.3% since the beginning of the year and 3.5% over the past 12 months.

The annual increase was driven largely by labor costs, which rose 5.4% over the year.

The index for materials and products declined 0.4% in July, while wages paid to construction workers increased 0.2% during the month.

 Household costs tell a more complicated story

The July CPI data point to relatively low headline inflation, with the annual rate falling to 1.5%. However, the underlying picture for households is more mixed.

Sharp increases in travel, rents and selected services contrast with falling prices for clothing, fresh produce and some household goods.

The housing market also remains in a transitional phase: prices have edged upward over the latest two-month period but remain below their level a year earlier.

The combination of moderate overall inflation, rising rents and continued weakness in parts of the housing market will remain important factors for the Bank of Israel as it assesses monetary policy and the direction of interest rates.