Rapid rise in apartment rents fuels inflation in Israel

Apartment for rent credit: Shlomi Yosef
Apartment for rent credit: Shlomi Yosef

Rents have risen 7.2% in the past year, the Central Bureau of Statistics reports. In the high demand summer rises could accelerate.

Apartment rents have risen 7.2% over the past 12 months according to the housing rent data in the Consumer Price Index (CPI). The rent data makes up 26% of the CPI, so clearly the rise in rents is one of the most significant factors fueling inflation.

In April the CPI housing rent data rose by a further 0.5% and on an annualized basis, rents rose 5.8% in the first four months of 2023. Moreover the summer months of July, August and to some extent September are the higher demand months for rental accommodation so rents can be expected to rise further, whereas in January and February rents often fall.

Back in January 2022 rents did fall by 0.1% and remained unchanged the following month but since then they have not stopped rising. Moreover, Central Bureau of Statistics data show that tenants renewing a lease pay an average hike of 3.6% while new tenants signing a lease pay an average rent of 9% more than the previous tenants - a national average of NIS 430 more per month in rent.

"The rental market is in trouble"

There are those who insist that the Central Bureau of Statistics CPI rental data only tells part of the story. Rami Ronen, CEO of WeCheck, which provides property owners with financial management risks reports for tenants, explains, "The sample size is small, and we must not forget that the price did not increase over a month, but increased relative to the price signed between the apartment owner and the tenant. So it is an annual increase. And if last year the apartment owner did not raise the rent for the tenant - then the increase is relative to the last contract signed between them, and certainly not in a month.

"I stress these things, because indeed, the rental market is in trouble, and it is going to get worse in the summer. We monitor all the rental ads, and we found out that in April the asking prices of the apartment owners increased by 0.9%, which is an annual rate of more than 11%, a very serious figure."

A survey released by the company last month found that in Jerusalem, Tel Aviv and Rishon Lezion rent prices have risen by 11% over the past year, by 12% in Netanya, by 10% in Holon, and by 14% in Petah Tikva. Only in Beersheva, where there is a large supply of apartments for rent, rent prices remained at the same level as in April 2022.

"We see a trend of an increase in the average rent over the past two months," the survey states. "The reasons: firstly, we see a decrease in the supply of apartments; secondly, due to the economic situation, potential buyers put off the purchase of an apartment and turn to the rental market; thirdly, the high interest rate environment creates an alternative price for money, therefore the rent rises; and finally, the political instability creates uncertainty in the housing market as well."

Published by Globes, Israel business news - en.globes.co.il - on May 17, 2023.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2023.

Apartment for rent credit: Shlomi Yosef
Apartment for rent credit: Shlomi Yosef
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