An annual increase of 7.25% – a figure to remember when today's bubble becomes tomorrow's unattainable dream. The rise in apartment prices, despite the pandemic, represents the Israeli government's failure in dealing with the ongoing housing market crisis.
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What's more, Israel is near the top of the chart. According to a Deloitte report, the most expensive city in Europe is Paris, with an average price of €12,916 per square meter. Next – and before Munich and London – is Tel Aviv, at €10,322 per sqare meter. Jerusalem, by the way, at just €6,627 per sq.m., is eighth.
The truth should be stated clearly, after a decade of rising prices: the government, as the representative of the public, is unable, and perhaps unwilling, to lower housing prices. And why should it be? Sixty-six percent of the country's population own the apartments they live in. Their sense of wealth is hard to shake. Who holds the other 34%? The luckier part of the 66% - those who have more than one apartment.
The fact is, the state only needs to take care of the newcomers. What it doesn't understand is that when the general market booms, the prices of new apartments also rise. Or perhaps it understands but just doesn't care.
Housing prices are going wild – that's no longer a conjecture, its a fact. While the new government is trying to develop a policy to treat the sickness (and no, I don't mean COVID), the Israeli public is swarming to buy apartments – large or small, special or even luxury apartments, of the kind that were very hard to sell only a year or two ago.
Low interest, benefits for investors, foreign buyers, and mostly disappointment with the government's performance over the past decade have all been fueling demand. On the other side of the equation is a decrease in the number of planned apartments and building starts, the COVID crisis that won't leave, and a shortage of workers in the industry. All these ensure that the supply side will not change the general tendency.
Faced with this unfortunate state of affairs, we asked Ohad Danos, former president of the Israel Land Appraisers Bureau, to survey the cities where changes are likely to occur over the next years, based, among other things, on their performance over the past year. Danos examined five positive and five negative performers. The results are surprising. For better or worse? You'll be the judge.
Tel Aviv: Up 9%
What's happening in Tel Aviv is very interesting. The city showed the highest increase among those surveyed. The average price of a 4-room apartment soared from NIS2.97 million in 2020 to NIS3.25 million today. That's NIS32,500 per built sq.m., averaging between new and second-hand apartments.
Lately, marked demographic changes have become apparent, with apartments in Tel Aviv's "tough" south selling for more than those in the northern neighborhoods. It no longer matters where in Tel Aviv the apartment is located – what's important is that it's new. So if you were thinking of banking on Shapira neighborhood as the next hot spot after Florentin, you've missed the momentum. The prices are now sky-high.
Recommendation: look for anomalies. They may not live long.
Ramla: Up 7%
Ramla is second in price increases, but apartment prices there are much lower. For a 4-room apartment you'll pay an average price of NIS1.63 million; last year you could have paid only NIS1.53 million. A hundred thousand shekels is nothing to scoff at, especially when you're paying NIS16,300 per built sq.m. – half of the average price in Tel Aviv.
Ramla is a mixed city, but without much conflict. During the recent crisis with the Arab sector it garnered less headlines, and in general is considered a more solid investment and not as tough as its neighbor Lod.
As a rule, mixed cities offer lower real estate prices than their uni-ethnic counterparts, for good reason or not – you decide. What's undeniable is that Ramla is a good and relatively cheap alternative in the central area, with many young buyers flocking there in recent years due to its location and favorable image.
Recommendation: look for properties close to the main transit arteries surrounding the city. Easy exit on the morning commute is essential.
Kfar Saba: Up 6%
Today, an average 4-room apartment can be bought in Kfar Saba for the considerable sum of NIS2.04 million. That's NIS120,000 more than what the same apartment cost a year ago – NIS1.92 million.
Kfar Saba is the (relatively) cheap option in the prestigious Sharon district. While in Herzliya, the average price per sq.m. is NIS26,300, in Kfar Saba it's around NIS20,400, or 22% less.
For those looking for a high standard of living in the Sharon area, the two cities have similar advantages and disadvantages and great branding.
Recommendation: Here as well, proximity to the main arteries leading outside the city is a major advantage.
Netanya: Up 6%
The average price of a 4-room apartment is NIS1.82 million – up from NIS1.72 million only a year ago. The average price per built sq.m. is now NIS18,200.
So what happened in Netanya over the past year? Perhaps it was the long beaches, some of them pristine, or the Israeli approach to the pandemic that attracted Jews from overseas, or the accelerated development of the city's east part and industrial zone and the grandiose plans of Mayor Miriam Feirberg. What's certain is that in light of the relatively comfortable level of housing prices, expectations for a further increase are entirely realistic.
Recommendation: buy properties with large balconies and as much of a sea view as possible.
Rehovot: Up 3%
Rehovot is the only city in Israel that has shown steady increases over the past decade. While in other cities, prices stalled during certain periods and even fell, reacting to the government's actions and promises, Rehovot couldn't give a hoot and just kept on climbing.
The reasons are many. First of all, Rehovot is a city where the state has almost no influence. Most of the lands are privately owned. Secondly, its mayor is committed and determined. Third, it is the city of science and culture. And fourth, major improvements to the city's transportation infrastructure over the past decade have made it attractive for those in nearby cities looking to improve their quality of life.
Over the past year, prices rose from NIS1.77 million to NIS1.82 million for a 4-room apartment. Though the difference is only NIS50,000, at an average price of NIS18,200 per sq.m., that's no small gain.
Recommendation: massive new building projects are planned for the city's outskirts. The real bonanza will be in the city's center.
Haifa: down 6%
Let's move on to the past year's negative performers, where the past doesn't necessarily indicate the future. The price of an average 4-room apartment in Haifa fell from NIS1.40 million in 2020 to about NIS1.32 million today. That's an average price of about NIS13,200 per built sq.m. – almost nothing in Tel Avivian terms. And that's not in a remote border town, but in the third-largest city in Israel. Some may argue it's the wild boars roaming the city's streets that scared the homebuyers away, but those who are in the know remind us that the boars were there before, too. What's more probable is that a more intelligent life form, namely investors, arrived in the city in legions, and, as is their wont, bought all the cheap apartments. These deals influenced the indexes, and that's how Haifa found itself with an unexplained fall in apartment prices.
Recommendation: Haifa isn't going anywhere, look for a suitable place at end-of-season prices. Bat Galim is no longer within reach, if that's what you wished for.
Jerusalem: down 5%
In Jerusalem you'll pay NIS1.97 million for an average 4-room apartment, while last year the price was NIS2.07 million. Losing NIS100,000 hurts, but is it really so, or are the indexes, like in Haifa, influenced by purchases of comparatively cheap properties in the city in 2021 compared to 2020? No one really knows in such a large and diverse city, in which variance is so great.
Jerusalem also represents the mixed cities at the lower end of the price increase spectrum, though here, due to its size and historical complexity, it seems the public doesn't attach much importance to that issue. Still, when its frisky sister on the coast overtakes it by 14% in annual performances, uneasiness creeps in.
Recommendation: follow the demolition-reconstruction plans. The municipality is utterly in love with urban renewal, and that's where the bonanza will be.
Modi'in: down 4%
In Modi'in you can now buy an average 4-room apartment for NIS1.94 million. Those who do will have saved no less than NIS80,000, since in 2020 they would have paid NIS2.02 million. Still, the average price per sq.m. is NIS19,400, which is no small sum.
Small apartments are very hard to come by in Modi'in, with a negligible supply of 2-room apartments and a meager supply of 3-room ones. That's why Modi'in is not an investors' city in the classic sense of the term.
Since the index is tied to 4-room apartments, and over the past year demand has naturally focused on larger and more spacious properties (and perhaps more special ones, such as garden and rooftop apartments), the drop-off in prices is understandable.
Recommendation: go for the top floors, because of the view and uniqueness.
Holon: down 3%
The price of an average 4-room apartment in Holon fell to NIS1.86 million, from NIS1.91 million a year ago. That's a drop of NIS50,000, to an average of NIS18,600 per built sq.m.
It seems the change in the city stems mostly from two reasons: the prices were high to begin with, pushing buyers to look for cheaper properties; and, perhaps more importantly, Holon's neighbor Bat Yam is enjoying a long-term real estate buzz, mainly due to the massive building projects along the shore and the soon-to-be-operative Red Line of the Light Rail.
Recommendation: urban renewal is the name of the next game in Holon. Look for the small apartments.
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Beersheba: down 2%
The changes in Beersheba are surprising, attesting above all to the power of the city's real estate market. Why? Because it's a city in which all of the land is in state hands, meaning the state can have a profound influence on prices. If there's anywhere the state can boost supply, it's here.
That's also the good news for young couples looking for a young city with an energetic mayor, Ruvik Danilovich, who took Beersheba into the new century on a cyber rocket.
And as if that's not enough, there's the roof agreement signed between the municipality and the state to add 23,000 housing units, which is a bit disturbing. Still, only 2%?
Yes, because the prices are still very attractive and this is a major city in the south of the country, with strong, well-branded institutions (Ben-Gurion University, the Soroka Medical Center, and more).
Over the past year, prices fell from NIS1.03 million to NIS1.01 million for an average 4-room apartment. The average price for a built sq.m. is NIS10,100.
Recommendation: bet against the coronavirus and buy a students' apartment.
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