The construction input index for residential properties in Israel continues to rise, with a 0.6% increase in May 2026, bringing the annual increase to 3.5%. This represents a surge of over 20% in the last five years. The rise is attributed to several factors, including a labor shortage due to the 'Iron Swords' war and restrictions on the entry of Palestinian workers, leading to increased wages in the sector. Additionally, the boycott of goods from Turkey has impacted material prices, which continued to rise despite a decrease in the dollar exchange rate.
In the past, such an increase in the index would have directly affected home buyers, but since 2022, a law has come into effect limiting the linkage of housing prices to the index, reducing the impact of increases on buyers. Currently, many contractors are absorbing the additional costs, making it difficult for them during a period of low sales and high financing expenses. If the trend continues, the rise in the construction input index may continue to impact the real estate market in Israel.