The average monthly rent for an apartment in Tel Aviv in the second quarter of 2024 was NIS 7,000, up 4.9% from the second quarter of 2023, the Central Bureau of Statistics reports.
Despite this statistical rise, industry sources say that in practice rents have fallen. Real estate agent Shirli Werner from Re/Max - Ocean, which manages three agencies in south, central and north Tel Aviv says, "Over the past year, rents have stabilized comparted with the situation in the market before the war. It's like there was a bubble here that has calmed down. Currently most landlords are less inclined to inflate rents and it is about the real value of the apartments. In other words, rents are not rising although there are isolated cases in certain properties."
Small apartments are less in demand
According to the Central Bureau of Statistics, rents in large apartments in the city rose more in comparison to smaller apartments. Monthly rents in 1-2 room apartments rose 2.5% to NIS 5,242, while rents in apartments with more than 2.5-rooms rose by 4.6%-4.9%. The average monthly rent in a 4.5-6 room apartment was NIS 10,601.
Keller Williams agent Shahar Tal, who is also a real estate appraiser says, "I deal with brokerage mainly in the city center and north Tel Aviv and the new areas. In small apartments of 1.5-2 rooms, the change is not great. There may have been an impact on this market, because young people who lived in these apartments, workers in restaurants and bars for young people, left the city or went back to live with their parents and so demand has shrunk and rents have fallen due to the situation. Perhaps ahead of the restart of university studies, students looking for small apartments will return.
The rental market is also seasonal. Ahead of the summer rents rise as families and young people close contracts before the start of the academic year. Tal says, "In May-June rents are higher while by July-August rents are falling and even more so in September."
Concern about an apartment staying empty for an extended period can cause landlords to lower rents. Werner mentions a rental contract that was closed at NIS 1,000 less than the asking price. "If in the past apartment owners were sticking to the price and because of high demand in the end it would be closed at the asking price, today the situation today is completely different. We are all living in a country and there are many who have been affected at the business level and many people have been called up to reserve duty."
"I can give an example of an apartment in the Old North that was rented on September 25th. The landlord tried to rent it out on his own and advertised for a month at NIS 10,500 per month and the apartment was not rented. We rented it yesterday for NIS 9,500 a month. People understand that it is better to lower the rent a little and not leave an apartment empty for another month."
The influence of dust and noise from building sites
The city is full of building sites because of construction of the light rail, urban renewal projects and new construction, Werner claims that rents are affected, among other things, by these building sites. "Over the last eight months, we have completed about 130 rental deals in the city. The issue of building sites in the center and Old North is a real nuisance and this is also reflected in rents. People are reluctant to live near construction sites. For example, the apartment I mentioned earlier is in the Old North and next to it will be a TAMA 38 (earthquake reinforcement and expansion) project. In a normal market they would get NIS 10,500 a month, but in these circumstances there is more flexibility among landlors."
Werner explains the differences between areas in Tel Aviv and rents. "In southeast Tel Aviv, like Yad Eliyahu and Kfar Shalem, rents are quite static compared with last year. There is no extreme rise maybe NIS 100-200 a month. There is more demand and less supply, and that's where people are really looking. Newer apartments and with security rooms. This is despite the fact that the situation has calmed down and there is a significant fall in the demand for secure rooms in rented apartments."
Rents vary greatly in the southeast of the city, she adds. "You can rent a four-room apartment for NIS 6,000-8,000 depending on the neighborhood and the area. Yad Eliyahu is more expensive in these areas. In Neve Hen we rented out a four-room apartment with an elevator and parking for NIS 6,500 in a relatively modern building. In Yad Eliyahu, we rented a five-room garden apartment in a newer building with a security room and parking for NIS 8,600. The price may be expensive for the area, but in comparison, a five-room apartment in the north of the city with similar specifications is rented for about NIS 15,000.
"In Jaffa, a 50 square meter, two-room renovated and furnished apartment is rented for NIS 7,500 per month. Less luxurious specification can lower the rent by NIS 1,500."
The luxury market - monthly rent of NIS 40,000
Shahar says that the trend he sees in the mega-luxury market since the Bank of Israel hiked interest rates. "In the luxury segment, there is an increase in rents. Penthouses are very expensive and rents have risen to about NIS 30-40,000 per month. The increase in rents is due to the fact that those with wealth who were thinking of buying luxury properties for NIS 12 million and above, do not see the feasibility of the purchase when the bank interest rate is good and prefer to rent an expensive apartment instead.
"Tomorrow I am showing an apartment to a client who was looking to buy for NIS 12 million. He has the money, but the situation is precarious and the money is in the bank earning interest, so he prefers to rent an apartment for NIS 20-25,000 a month. I currently have 10 expensive apartments and we recently rented several expensive apartments and there is a crazy demand for them. For example, there is a very prestigious penthouse for rent in new Ramat Aviv for NIS 40,000 a month that is expected to close soon."
Published by Globes, Israel business news - en.globes.co.il - on October 13, 2024.
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