Tel Aviv apartment rents continue to rise as if the Covid-19 economic crisis hasn't happened. The only question that remains is whether the trend will reverse when government assistance to the unemployed dries up.
According to Israel's Central Bureau of Statistics, the average 2.5-3 room apartment in Tel Aviv rented for NIS 5,766 per month in the third quarter of 2020, up 9.5% over the past three years, and up 1.2% over the past 12 months. Over the past year apartment rents in Tel Aviv Itself have risen faster than in the six large surrounding cities (Bat Yam 1.1%, Ramat Gan 0.9%, Holon 0.8%, Rishon Lezion 0.5% and Petah Tikva 0.3%).
A recent survey by real estate market research company Czamanski & Ben Shahar found that Central Tel Aviv and the Old North remains the most expensive real estate market in Israel with prices falling to the east and south.
It was only in March that the Bank of Israel identified a sharp rise in the number of apartments for rent in Tel Aviv following the collapse of the Airbnb tourist market and the high number of unemployed young people who had returned to live with their parents during the first lockdown accompanied by a 15% fall in the level of rents being asked. But by April the Bank of Israel noted that the market had stabilized and the latest figures suggest this was all just a fleeting episode.
Czamanski & Ben Shahar CEO Tamir Ben Shahar observes that the Covid-19 pandemic has boosted the global trend of city center living. He said, "You don't see the coronavirus impact in the figures but it comes from other directions and first of all building planning. You see this in the issue of balconies, and mixed use close to the home. There are five things - to live, to learn, to shop, and to have leisure and all within a 15 minutes radius of your home. It's not suitable for everywhere and there is no need for a car. People don't want to be restricted."
"From March this point sharpened, mainly overseas. They took advantage of the opportunity and changed streets. They significantly did away with public transport lanes and increased bicycle paths and pedestrianized streets and strengthened the trend that was there before to "live in the street." Young people no longer need a large apartment. Not even a large kitchen or large refrigerator because they eat out and live outside. In Tel Aviv they did this recently with Levinsky Street and other places but in the main cities of the world this is a trend.
The results of this trend of everything within a 15 minute radius fits the bill for everything between Tel Aviv's Yarkon River in the north, the beach in the west, the Ayalon Highway in the east and Florentin in the south. In this rectangle rents can typically be about NIS 104 per square meter or NIS 7,300 for a three room apartment per month, well above the average of NIS 5,766 in the city as a whole. For example, north of the Yarkon River including Kokhav Hatzafon, Hagush Hagadol and Ramat Aviv, the price per square meter is just NIS 86, or 17% less than the city center and Old North, in the southeast of the city rents are even less at NIS 71 per square meter and in the far east of Tel Aviv NIS 65 per square meter, and even less at NIS 64 per square meter in Ramat Gan.
"There is a very clear picture," says Ben Shahar. "The further east you go, the lower the prices get." The Central Bureau of Statistics data back up this claim and it is also true of the further south you go.
A lot has been said about Covid-19 allowing people to live further away from work and greater flexibility in choosing where they live. Do you see these things?
"Meanwhile no. They're selling stories from California and San Francisco. I believe that here too more people will want to live in the countryside, but I don't see young people giving up on the vibe of Tel Aviv in order to live further out."
There is a problem that these young people are unemployed and can't pay the prices
"Meanwhile the prices aren't falling. Most businesses, not to mention services or trade, banking, finance, high tech have still not been harmed. A survey by the Students Union found that 20% of students went to live with their parents. Not all of them. And don't forget that in their place there are new students. In other words, instead of those who left, new customers have come along who have kept the price level high."
Rent prices also interest real estate investors who are looking for maximum returns on the homes they buy. Tel Aviv still gives relatively low returns on average of 2.6% per year, up from 2.4% three years ago.
Czamanski and Ben Shahar's figures show that in the more expensive areas of Tel Aviv, the annual return for homeowners on rents is 3%, with the higher rents disproportionate to the higher price of the apartment. In the eastern part of the city the annual return for investors is 2.6%, north of the Yarkon it is 2.4% and in the cities surrounding Tel Aviv it is 3%.
Published by Globes, Israel business news - en.globes.co.il - on December 23, 2020
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