"Globes" study: Rents up 10% in two years

The summer's social protest had no effect on the trend

The Central Bureau of Statistics reports that the percentage of renters rose from 27% of the population in 1995 to 34% in 2008. High home prices, and the fact that most Israelis prefer to live in the center of the country, have caused renting to become increasingly prevalent.

The low supply of homes, including rental homes, is driving up rents. Moreover, Minister of Finance Yuval Steinitz's so-called "sledgehammer plan" to temporarily exempt the sale of second apartments from the betterment tax, is inadvertently liable to aggravate the shortage of rental apartments by reducing the inventory of second apartments that are rented out by their owners. The supply of public housing has fallen over the years as the result of government campaigns to sell these apartments to their tenants, while building no new ones.

There is little hard data about the rental market, which is dominated and run by homeowners, with the result that there is no organized list of rental transactions. MNA Real Estate Research CEO Anna Vasserman carried out an analysis of the Israeli rental market for "Globes". The study was based on data from 113 classified ad sources, including leading online sites Homeless, Yad2,Winwin, Madas, and Lagur.

The survey covered 25 cities nationwide: Tel Aviv-Jaffa, Ramat Gan, Givatayim, Herzliya, Petah Tikva, Ra'anana, Hod Hasharon, Kfar Saba, Netanya, Hadera, Ariel, Jerusalem, Haifa, Kiryat Ata, Ashdod, Ashkelon, Beersheva, Sderot, Netivot, Eilat, Kiryat Shmona, and Katzrin. The study compared summer rents in June-September in 2009, 2010, and 2011.

The highest rents for all types of apartments during this period were in Tel Aviv. The average rent for a three-room apartment rose from NIS 4,358 in the summer of 2009 to NIS 4,835 in the summer of 2011, which may help explain why Dafni Leef launched the tent protest. The average rent of a four-room apartment rose from NIS 5,569 in 2009 to NIS 6,082 in 2011, and the average rent of a five-room apartment rose from NIS 6,981 to NIS 7,634.

The average rent in Jerusalem rose 8% to NIS 3,677 for a three-room apartment in 2011, to NIS 4,454 for a four-room apartment, and NIS 5,740 for a five-room apartment. The average rent in Haifa rose 6% to NIS 2,710 for a three-room apartment in 2011, to NIS 3,278 for a four-room apartment, and NIS 4,162 for a five-room apartment. The average rent in Beersheva rose 9% to NIS 2,200 for a three-room apartment in 2011, to NIS 2,992 for a four-room apartment, and NIS 3,832 for a five-room apartment.

The study found that the greatest increase in rents occurred in 2010-11 and mainly affected five-room apartments. The average rent for five-room apartments rose by 10% in Ramat Gan, Ra'anana, Givatayim, Hod Hasharon, Hadera, Eilat and Ashdod. The average rent for three-room apartments rose by over 10% only in Ariel and Ashdod.

The study sought to establish whether the summer's social protest caused landlords to freeze or lower rents. Despite media reports about specific initiatives to lower rents, they have not fallen anywhere in Israel. On the contrary, rents rose more between the summer of 2010 and the summer of 2011 than between the summer of 2009 and the summer of 2010. "In general, it is possible to see a rising trend over the years," says Vasserman. "Although we expected to see a drop in rents in the summer of 2011, due to the social protest, we were surprised to discover that not only did rents not fall, they actually rose."

The reason may be that, in contrast to companies that sell goods, landlords who rent out their apartments are not amenable to boycotts.

The residential rental market is a rigid market, the number of rental apartments available in the short and medium term is more or less stable, while demand only increases as the population grows, resulting in rising prices.

The survey found that Tel Aviv had the highest proportion of rental tenants among Israeli cities at 41.2% of its residents. 30.5% if Haifa's residents live in rented apartments, and 29.8% of Jerusalem's residents.

The proportion of Israelis who rent drops as families grow. 42.1% of Israelis without children rent, compared with 34.6% of families with one child, and 9.1% of families with four children. Jews rent more than Arabs: 25.2% compared with 11.8%.

Published by Globes [online], Israel business news - www.globes-online.com - on November 14, 2011

© Copyright of Globes Publisher Itonut (1983) Ltd. 2011

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