War pushes Tel Aviv rents down sharply

Tel Aviv credit: Shutterstock
Tel Aviv credit: Shutterstock

A few months ago, new apartments for rent on the market were snapped up, but real estate brokers now report that landlords must cut rents.

The Israel-Hamas war has hit the Tel Aviv rental market. Two months ago every new ad to rent an apartment in the city, which was posted on one of the Facebook groups for rentals, would attract hundreds of responses. Today there are few responses and most are asking if there is a security room.

Real estate broker Dror Mangal, who specializes in Tel Aviv's Old North district, describes how the war has affected the city. "I have been a broker for 20 years in Tel Aviv. Since the war, I can say that there is now a large supply of apartments, things we have not seen before. Since the beginning of the year, it's been possible to see a drop in prices and since October 7th it has intensified. I'm not claiming that there are no deals, because after all, people need to put a roof over their heads, but the picture has changed."

It's possible that some potential tenants have been called up to the army reserves, returned to their parents or had planned to start studying and in the meantime the start of the school year was postponed, "People are finding alternatives", Mangal says. "I sit and hear all kinds of tenants who have already turned to landlords asking for a reduction in rent. There is no doubt that if in the past there was a trend of price increases, now we no longer see that."

Alongside the rise in supply, real estate brokers in Tel Aviv talk about a fall in rents being asked, and ads that are placed again and again, with the headline 'rent revised' and eventually the ad might even say 'flexible on price.'

Mangal says, "It's enough to open an online ad page and see that there is a crazy amount of apartments being offered at reduced prices. For example, an apartment advertised for rent at NIS 10,000 per month several months ago has been reduced by NIS 1,000, apartments for NIS 8,500 per month have fallen to NIS 7,600-7,800 - there is a 10-12% reduction in prices."

"Landlords have lowered the price, otherwise apartments will stay empty. There are properties that remain empty for quite some time. We are talking about 38 days since the war broke out, and as I mentioned, the situation before that was not good."

Mangal adds, "The first or second question that renters ask, beyond the description of the apartment for rent, is whether there is a security room. The demand for apartments with security rooms is now higher. Apartments that are without security rooms, are put more in hold at the moment."

AR Real Estate CEO Ron Ackerman, who brokers homes for rent and sale in Tel Aviv and the surrounding cities, says that the situation in the market means apartments are stuck, even if they have a security room. "I currently have apartments with security rooms and without security rooms, some of them in neighborhoods north of the Yarkon and in the Old North and in Ramat Gan," he says. "I can tell you there is simply a complete standstill in renting apartments . There aren't even inquiries. Only those whose contract is really finished and have to leave are interested in renting, and there are a lot of apartments for rent on the market.

"People aren't in the mood and they don't know what their future will be and what it is going to happen. They don't want to improve their housing, unless they are hysterical about a security room but how many people like that are there?"

Ackerman says the market has not yet absorbed that the price is falling and properties are standing empty in the city: "I have a client with a four-room apartment for rent in Neve Sharet. She wants NIS 8,400 per month for it. I explain to her that this is no longer the price, but she is not ready to go down. As a result, the apartment has stood empty for three months and municipal tax is being paid on it.

"At this time, people need to be flexible. I tell landlords, you don't have to sign a two-year contract, but it is better to sign today at a reduced price for a period of one year, and in a year it will be possible to try to raise the rent.

"Like at the beginning of 2022, when sales stopped because of the interest rate, property owners have not fully understood the market situation at the moment, compared with buyers and renters who take it in quickly. It took the apartment owners a few months to understand that they would be stuck with the apartment if they aren't flexible. The same thing happens in renting.

"There are those who say there might be immigration to Israel with all the anti-Semitism - everyone is waiting to make the bonanza - but for now it's all nonsense. Then some French and English people will come but it won't change the market significantly, it's a drop in the ocean. I predict that the market will be at a standstill for at least six months.

"There was a situation where apartment owners who wanted to sell the apartments and were unable to, decided to rent them out and that's how more apartments came onto the market. There are many apartments at high prices for this period."

In the third quarter report of Israel Land Development Co. (TASE: ILDC), it said, "A prolonged state of war involves uncertainty which may cause a decrease in demand for apartments, which will slow down the pace of sales. Also, due to the war, residents of dozens of settlements in the south of the country and in the north of the country have been evacuated to towns in the center."

Real Capital manager Tomas Harbon sees interest from residents of the south and foreign residents in renting. He says, "There were a few, mainly from the south in the Gaza border area and the Ashdod area. There is also interest from foreign residents who, because of anti-Semitism, want to rent an apartment in Israel because they don't know what they want to do. The apartment owners I deal with quickly understood the situation and thought it right to lower the price. This is legitimate at a time like this."

On falling prices, Harbon says, "We approached all the apartment owners ahead of time and told them we are entering a challenging period and that if you don't want to be stuck in the market for months, you should cut the rents being asked in advance and not wait. People who have come to the city are not necessarily looking for better housing but just need a house near a school or a kindergarten. So there is added value in finding the right thing for people."

The entire rental market has been hit by the war, but it seems that the luxury apartment market in Tel Aviv, which was in crisis even before, has been hit even more. Mangal says, "Of course the luxury market is the most affected by the uncertainty and it is gradually falling. It is more difficult for people to spend NIS 15,000 or more a month on rent in this uncertainty. The rest of the public tries to save and protect itself and they save where they can save.

"If we can return to our parents. If someone thought of living alone, they will now look for flat mates or other ways to save. Families and couples do not always have this luxury, but the trend is to cut costs as much as possible. There is pressure from the public and no mood to find something new. The fear, the uncertainty and the unknown puts the public into a different situation on a psychological level and people are concerned what will happen to them."

Published by Globes, Israel business news - en.globes.co.il - on November 20, 2023.

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

Tel Aviv credit: Shutterstock
Tel Aviv credit: Shutterstock
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