The number of short-term rental apartments in Tel Aviv is still rising, reaching 26,000 properties in December 2019: 21,300 apartments and 4,700 rooms within apartments, according to figures obtained from Airdna by "Globes." Airdna is an international company that monitors data on rental properties from online platforms, with data on ten million properties in 80,000 markets.
The number of properties, which was 22,500 in December 2018, grew by over 15% in 2019. The occupancy rates of the properties also rose; of the 21,200 apartments offered for rent in 2019, 16,000 were rented, compared with 11,500 apartments rented out of 18,000 offered for rent in December 2019.
The figures are based on the supply of short-term rental apartments in prominent websites in the sector: Airbnb, HomeAway/VRBO, and Booking.com - supply and demand, occupancy rates, and average daily prices. The figures show growth in all of these parameters for properties located in Tel Aviv and Jerusalem.
The revenue turnover per property rose 10% in 2019, which Airdna considers impressive. Average daily rates for renting an entire property also rose 5% to $171 a night.
The supply of rental apartments in Tel Aviv peaked in May 2019, during the Eurovision Song Contest. The supply of short-term rental properties last May reached 13,500, 11,500 of which were whole properties. The supply of properties totaled 11,000 in July-August, of which 9,700 were entire apartments, and grew to 12,000 in September and October, over 10,000 of which were entire apartments. The proportion of properties actually rented was 70% of apartments in December 2019. For the sake of comparison, the supply of hotel rooms in Tel Aviv was 8,800, and the average annual hotel occupancy rate in Tel Aviv hotels was 76% - the highest in Israel.
The short-term rental figures in Jerusalem were substantially lower than in Tel Aviv. 4,000 short-term properties were offered for rent in Jerusalem in December 2019, of which 3,400 were whole apartments. The peak months in Jerusalem in the supply of properties for tourists were September and October, the holiday months, when the supply of short-term rental properties in Jerusalem reached 4,400.
Occupancy rates in the Jerusalem are higher than in Tel Aviv. For example, in December 2019, the occupancy rate for whole apartments was 85%. The average overnight rent for a Jerusalem apartment varies according to season. In the peak month of October, it was $210 per night; in February, in the off season, it was $160 per night. In contrast to Tel Aviv, Jerusalem had more hotel rooms, 11,125, than apartments available (East and West Jerusalem).
The rise in the number of rental properties, most of them aimed at tourists, matches the increase in the number of tourists visiting Israel. Short-term rental apartments are usually used by foreign tourists. 4.55 million tourists visited Israel in 2019, 10% more than in 2018, while hotel overnights rose only 4.7% in 2019, and the number of tourist overnights totaled 12.1 million. The difference is partly explained by the selection of a rental apartment, which is a cheaper overnight option than a hotel.
Use of short-term rental apartments by tourists is not confined to Israel, but the number of such apartments has spurted by a higher rate in Israel than in the rest of the world. At a conference held by the Israel Hotel Association in December 2019, Airdna presented figures showing that the number of properties rose from 3,900 in 2014 to 22,800 in November 2019, a 488% leap, while the global increase was 140%.
Airdna attributed the growth in Israel to the lack of regulation in the sector. In cities in which regulation has been applied, the number fell. Barcelona, for example, removed 2,500 properties found to be illegal, after the number of short-term rental licenses for property owners was limited to 10,000. In other cities, the number of days in which properties could be rented was restricted. Paris limited the number to 120 days in 2017, and a year earlier, London restricted the number of rental days to 90. The number of rental days is limited to 30 days in New York. In Amsterdam, the number was set at 60 days in 2017 and lowered to 30 days in 2019. The figures show that the number of rental properties in Amsterdam is falling every day.
"Short-term rental properties are a plague"
Hoteliers are alarmed about the growing competition, which they say is on unfair terms. The booming short-term apartment rental sector, on the other hand is also attracting them. Fattal Holdings, Israel's largest hotel chain, currently owns three buildings in Tel Aviv, one building in Haifa, and one in Beersheva used for short-term rentals, mainly for businesspeople and their families. The chain entered this sector in November 2018. During the launch, controlling shareholder David Fattal told "Globes," "We're seeing changes in the hotel and hosting sector all over the world. It's my duty to my company and my investors to assess the changes taking place, and to act accordingly."
Fattal's act has drawn considerable criticism. "Short-term rental apartments are a failure that has already been corrected in regulated countries. For some reason, Israel is totally ignoring the sector: both the local authorities and the Israel Tax Authority. It's obvious to everyone that there is an immediate need for legislation or regulation in some other way, but there are those who prefer to ignore it," says Israel Hotel Association president Amir Hayek.
"Hoteliers aren't the only ones suffering from the lack of regulation in the sector," Hayek adds. "Tel Aviv already has more apartments for rent than hotel rooms. Residents are experiencing a rise in rents, and the buildings in which they live are becoming a tourist promenade. The apartment owners are making a killing. The state wants to prevent investors from crowding into the apartments market, but it is ensuring a high return for owners of short-term rental apartments, and in effect encouraging the purchase of properties for this purpose."
Hayek has something to say in the matter. "We're currently putting the finishing touches on a petition to the High Court of Justice against the Tax Authority, in which we say something very simple - take action. There are tax laws in Israel that don't depend on having a government; they are a matter for enforcement. Short-term rental properties are a plague that isn't confined to Tel Aviv and Jerusalem; they also exist in Eilat and Haifa. We aren't dealing with apartment owners subletting their homes for a few weeks when they're overseas - that's a good shared economy. What interests us is businesses trading in dozens and hundreds of apartments and managing them as a hotel spread around the city, without regulation or taxes, and without paying the municipal property taxes of a business."
Will Tel Aviv learn from Berlin?
The figure show that the problem, which is most acute in Tel Aviv, could lead to over-tourism, a problem afflicting cities like Venice, Barcelona, and Lisbon. The Tel Aviv municipality is well aware of the phenomenon, and has been unsuccessfully trying to combat the problem for years. The Ministry of the Internet dismissed the municipality's request to increase municipal property tax 2.5-fold, saying that the increase is excessive. The municipality resubmitted is request for 2020.
The municipality is now looking forward to the next government to be formed in the hope that it will regulate the sector, including through legislation restricting the leasing of properties to 90 days a year. "This matter has to be addressed by law at the national level, including deterrent sanctions for offenders," says Eytan Schwartz, CEO of the Tel Aviv Global & Tourism municipal company. "Such a restriction, which is common in the world today, will create a clear distinction between a shared economy and a de facto market of renting apartments for hotel purposes. Enforcement of taxes by the Tax Authority is also not a full solution. It can actually be a double-edged sword, because if the state does this in order to increase its tax revenues, it will only make the phenomenon legitimate, instead of getting rid of it, while the tax will be rolled over onto the tourists. The illegal and uncontrolled hotel business can be stopped by restricting the number of days in which properties can be rented and stopping the apartments cartel taking over the city."
"It's a matter of public importance that people like Tel Aviv, but there has to be a balance between the interests of tourists and those of the city's residents," adds Tel Aviv City councilperson Maya Nouri-Shaked, the representative of young people in the municipality. "The number of apartments for rent in Tel Aviv is already higher than the number in Barcelona. The purpose of legislation is to restore the market for small apartments which have almost disappeared from the market, and to moderate soaring prices. They raised my rent to NIS 1,000."
"Globes": It is also possible to follow the example of Berlin, which froze rents for five years.
Nouri-Shaked: "This also requires legislation. Personally, I support it."
Published by Globes, Israel business news - en.globes.co.il - on February 26, 2020
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