From 2013 to 2017, credit card debt in Israel increased by 148%, and the amount of loans issued by financial institutions increased by 140% while bank credit to private households slowed, a new study by the Taub Center for Social Policy Studies in Israel indicates.
The study shows that in 2017, the household debt to GDP ratio in Israel – 42% – was better than many other countries, where it was as high as 100%. However, since 2017, the household debt to GDP ratio in Israel has been rising. As of the end of 2017, total household debt in Israel comprised NIS 530 billion ($152 billion at the end of 2017), 5% higher than in 2016.
From 2008 to 2017, household debt in Israel jumped by 84%. Total mortgage debt, which is usually subtracted from the value of the home for which a mortgage was issued, increased by 70% in the same period.
Dr. Labib Shami, who conducted the study, said that the rise in credit debt carries "risks that could stem from households being over-leveraged. In other words, falling deep into debt compared to their income. That could endanger their financial stability if interest rates rise or if housing prices drop."
Debt has hit the bottom tenth economic percentile of the population in Israel especially hard. In that percentile, 59% of the population in debt are in their prime working years (25-54) compared to the top tenth percentile, in which 75% of the population in debt are in their prime working years. Households in the top tenth percentile also take on loans mainly at young ages and work it off over the years, which allows them to maintain a steady level of consumption throughout their lives, the study showed.
Meanwhile, a report by the Central Bureau of Statistics reveals that the number of Israeli households who own the homes in which they live dropped from 70.2% to 66.5% in the 20-year period from 1997 to 2017.
The number of households who rent their housing rose from 24.3% to 27.9%.
Finance Minister Moshe Kahlon promised that in his next term, he would build another 150,000 apartments to be sold to young families as part of the government's "Move-in Price" subsidized program for first-time home buyers.
