According to new data from the Central Bureau of Statistics, the Consumer Price Index fell by 0.3% in May, while annual inflation remained at 1.9%. After a long period of higher costs and economic uncertainty, this is an encouraging sign for the wider economy.

For the real estate market, the picture is more complex, but also very important.

Home prices have returned to falling. The housing price index dropped by 0.3% in April, and over the past year, home prices are now down 1.3%. New home prices fell even more, with a yearly decline of 3.9%.

This does not mean the market is collapsing. It means the market is adjusting.

For buyers, this can create more breathing room. Prices are no longer rising as quickly as they did in previous years, and in some areas, sellers may need to be more realistic. Jerusalem and Haifa saw sharper monthly price declines, while Tel Aviv continued to show signs of recovery.

At the same time, the rental market remains strong. Rent for tenants who renewed contracts rose by 2.5%, while rent for new tenants jumped by 6.8%. This shows that demand for rental homes is still high, especially as higher interest rates continue to make buying more difficult for many households.

Construction costs are also still rising. The residential construction input index increased by 0.6% in May and is up 2.2% since the beginning of the year. This means developers are still dealing with higher building costs, even as home prices soften.

So what does this all mean?

Israel’s property market is not moving in one simple direction. Buyers may have more room to compare, negotiate, and make careful decisions. Sellers need the right pricing strategy. Investors should pay close attention to rental demand, which remains one of the strongest parts of the market.

After several years of fast changes, the market seems to be moving into a more balanced stage. And in real estate, a more balanced market can create real opportunities for people who understand what is happening.

Source: Levin, R. M. (2026, June 15). האינפלציה מפתיעה לטובה במאי: הקצב השנתי נותר על 1.9%; מחירי הדירות חזרו לרדת Globes. https://www.globes.co.il/news/article.aspx?did=1001545971