Who is willing to pay NIS 50,000 per square meter for a new apartment with no parking? Quite a few people, it seems, and not just in central Tel Aviv. On the one hand, in an era in which the local authorities and the state are restricting parking, talking about congestion charges, and taking other steps to make people give up their cars, such as shared travel lanes on the coastal highway and Ayalon Highway, it sounds logical. On the other hand, few households in Israel are capable of doing without a car and relying exclusively on public transport and other alternatives.
"It is assumed that Israelis are unwilling to forego a car," says EcoCity SL Development and Construction co-CEO Elie Bar, who designs and builds urban renewal projects in central Tel Aviv. "At the same time, we are beginning to see signs that buyers are willing to listen to offers of a new apartment in the city center without parking. In my opinion, this trend will pick up steam."
Bar attributes this to the special character of Tel Aviv, which he says provides good quality of life even without having parking space underneath the house. There is alternative transport available, such as buses, shared taxis, scooters, and a reasonable network of bicycle paths. "We're building ten projects in the city center, and apartments without parking are being sold in three of them. People who buy an apartment without parking do it because it fits their lifestyle and because it's worthwhile for them," he says.
Guy Luxman, VP marketing of The Israeli Structure Strengthening Company, which is building 50 Tama 38 project in Tel Aviv, says that in Tel Aviv, people are willing to buy an apartment without parking and live in it, not just as an investment. "The buyers of ordinary 3-4-room apartments usually live very close to the project. They know the city center, work in the area, and like it. Sometimes they are renters who have decided to buy, and sometimes they are move-up buyers," he explains. Luxman says that someone coming from out of town, even from other cities in the Tel Aviv area, is totally unwilling to consider or pay these prices and be left without parking.
Bar asserts that even in the luxury apartments segment in central Tel Aviv, not everyone insists on parking. "We have penthouse buyers who didn't demand parking, and it's worthwhile for them. People who compromise on this point, even in the luxury segment, can get an apartment on a high level at an attractive price," he claims.
Luxman describes things a little differently. He says that a 140-150-square meter luxury apartment or penthouse with a price in the NIS 8-10 million range is almost impossible to sell at this price without parking. In such a case, the developers have to find creative ways of finding solutions and providing buyers with parking. If parking cannot be provided, the developers utilize other means, such as dividing the large apartment into two smaller apartments, which creates other problems for the developer, such as the need to pay twice the NIS 50,000-70,000 fee per apartment to the municipal parking fund.
Saving NIS 500,000 and parking on the street
Going without parking saves quite a bit. "For an average 100-square meter apartment in Tel Aviv, the value of nearby parking is NIS 500,000," says Bar. Luxman mentions a similar sum, adding that for luxury apartments in central Tel Aviv and for penthouses, the difference between an apartment without parking and one without can even reach NIS 1 million. Instead, the developers pay the municipality a no-parking penalty and sell the apartment at a much lower price than one with parking.
Apartments without parking are plentiful in central Tel Aviv, but that does not mean that people in the area do not have cars. People have simply gotten used to not having a nearby parking space; they look for a parking space on the street or in one of the municipal parking lots that give 50-75% discounts, and even free night parking, showing that people may want to save the high cost of parking, but are unwilling to give up their cars.
The solution for such cases is supposed to come from the municipality, which requires developers of apartments with no parking to contribute to the municipal parking fund. The municipality requires every contractor who wants a building permit to provide parking solutions for the buyers, either by construction a parking lot or by paying for use of a public parking lot. The Local Planning and Building Commission is nonetheless authorized to grant a contractor an exemption from building a parking lot in exchange for a contribution to the municipal parking fund. The municipality is supposed to use this money to grant parking in a nearby public parking lot. This is only a partial solution, however, and many disputes have emerged over the years on this question.
"In the bottom line, says Bar, "it's an ideal deal for someone who isn't a heavy car user - who uses a car seldomly and on weekends."
Tel Aviv-Yafo Deputy Mayor Meital Lehavi, who is responsible for transport in the Tel Aviv municipality, believes that the money in the parking fund should also be used for purposes other than parking. "In view of the reduction in the required number of parking spaces for private vehicles and the policy of encouraging public transportation, it will be allowed in the future to use the money in the fund for public transportation terminals and logistics sites in coordination with the revolution taking place in transportation," she says.
Not stopping at the Tel Aviv boundary
People in Tel Aviv may be used to getting around without a car, but it turns out that apartments without parking can also be found in other cities. "There has been a significant trend in recent years, says Lior Roth, CEO of Misgav Marketing Residential Complexes, which markets projects to the large construction companies in Israel. Roth says that in principle, in areas close to the light rail in central Israel and Jerusalem, the authorities are trying to reduce the number of parking spaces according to the new parking standard. While four and five-room apartments used to have two parking spaces per apartment, the municipalities are now trying to limit this. "The process is just starting, but such a trend exists. On Jaffa Street in Jerusalem, for example, we had a project that we finished four years ago, and the municipality allowed us to sell apartments without parking, because we were only 100 meters from the light rail," Roth states.
"Globes": In your opinion, are Israelis willing to give up a car, or a least parking?
Roth: "Not really. People still want two parking spaces per apartment. Most of these apartment buyers are investors who don't necessarily live in the apartments that they buy. The global trend, however, is towards restriction of private vehicles and switching to public transportation and other solutions, and it is beginning to penetrate. In the area of the Ramat Gan Diamond Exchange, for example, near the light rail, people realize that they will be able to make do with only one car."
What is the difference in price?
"The cost of a parking space in the Tel Aviv area outside Tel Aviv proper is NIS 200,000-300,000, and NIS 500,000 in Tel Aviv. If they produce fewer parking spaces, it's significant.
"In places where the municipalities allow construction without parking spaces, they don't even impose a penalty for it. It's a trend."
Roth looks at Manhattan, and it makes him especially optimistic. "There was once an awful shortage of parking in Manhattan," he says, "but in recent years, with shared transportation services like Uber gaining momentum, there is no longer a shortage of parking in Manhattan. On the contrary - people can't rent out all of the existing parking spaces."
Will what works in New York also work in Israel?
"It's part of a global trend. If they restrict the entry of vehicles into the large cities, like in the rest of the world, I believe that it will also happen here."
Published by Globes, Israel business news - en.globes.co.il - on December 16, 2019
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