Jerusalem, 27 July, 2025 (TPS-IL) — Housing prices in Israel have risen at a very high rate in recent years, far above the rate of inflation and wage increases, reported the National Economic Council in the Prime Minister’s Office. Prices show downward rigidity: when demand increased, there was a sharp increase in price, but when demand returned to normal, housing prices remained high and even continued to rise.

A team formed to examine the involvement of banks in determining housing prices issued its final report.

One possible explanation for asymmetric price rigidity is competitive failure: when demand falls, the current price can be a natural focus for players in the industry, who know that there is a mechanism that causes other players to adhere to the same price, said the Council. This mechanism does not require explicit coordination or communication between players, but it allows for the sterilization of competition.

The team’s examination revealed that a large number of developers operate in the construction industry, with even the largest ones accounting for no more than a few percent of the total new apartment market. Hence, the concentration in the developer segment is extremely low, and accordingly, the chance of oligopolistic coordination among them is small.

The team determined hat the banks that finance new developments should not be involved in the setting of prices for the new units.

Gil Tanenbaum

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