The cost of new homes in Israel is set to rise sharply, with buyers potentially paying up to 10% more than their original contract price due to a significant increase in the building inputs index. Although the index rose only 0.3% over the past four months, the annual rate has surged by over 5%, marking the highest increase since 2021. This jump is partly due to a long-overdue revision of the index, which now better reflects rising costs in labor and materials, especially following the recent war and the ban on Palestinian workers.

The Central Bureau of Statistics is still updating the index, and further increases are expected as demand for construction workers grows and urban renewal projects expand. These rising costs are impacting developers and contractors, who are paying more for labor and materials while apartment prices have been falling, squeezing their margins. However, experts suggest that this situation may be temporary, with expectations of renewed demand in the real estate market in the coming year.

Ultimately, the additional costs are likely to be passed on to buyers, especially those who signed contracts before recent legal amendments. Many buyers could face extra charges amounting to tens of thousands of shekels, as the full linkage of apartment prices to the building inputs index results in higher final payments.