Tel Aviv: Israel's cheapest city?

Tel Aviv Photo: Shutterstock
Tel Aviv Photo: Shutterstock

It's not just the vibe; on a cost-benefit analysis, it pays to live in Tel Aviv.

Let me try to persuade you that Tel Aviv is actually a cheap city, perhaps even the cheapest in Israel; that in the critical test of cost versus benefit, what I give and what I receive in return, it pays to live in Tel Aviv.

Tel Avivians love to talk about the "vibe" that keeps them in the city, but it's important to talk about cold economic considerations as well, about the fact that they receive from wealthy, self-satisfied Tel Aviv more than they could receive from any other city in the country. Were they to move to a place like Harish or Rosh Ha'ayin, they would certainly save thousands of shekels on rent, but the savings would very quickly go on fuel and vehicle wear and tear (and that without pricing the time lost on the roads, which can never be retrieved).

More benefit than cost

The new news is that, last week, the Tel Aviv municipality approved benefits worth thousands of shekels a year for families living in the city. They come in the form of discounts on after-school daycare and on private lessons, extension of the school day in high schools, savings on extra-curricular activities for children, and on country clubs, and more. Tel Aviv Mayor Ron Huldai celebrated the decision: "Although we have no influence on housing, food and toiletries prices, we must do everything we can to enable the middle class to continue living in the city," he said.

And indeed, according to the dry data published by the Central Bureau of Statistics, Tel Aviv is one of the most worthwhile cities for residents, in cost versus return. Average arnona (municipal rates) per person in the city is NIS 1,951 a year, which compares with NIS 2,131 per person in neighboring Givatayim and an average of NIS 1,235 for all Israel's cities. What tips the balance in Tel Aviv's favor is undoubtedly municipal spending per person. In Tel Aviv it is NIS 11,981 annually, the highest in the country. The national average is NIS 7,647, and the figure for Givatayim is NIS 7,061. In other words, every person in Tel Aviv receives almost NIS 10,000 net a year from the municipality.

And what of the crazy cost of housing in the city? Only recently, the Central Bureau of Statistics published its survey of rents in Israel for the end of 2021, showing how expensive it is to live in Tel Aviv. The average monthly rent for a large apartment, 4.5 to 6 rooms, is NIS 9,427, 64% higher than the countrywide average for a such an apartment (NIS 5,744). The average monthly rent for an apartment with 3.5-4 rooms in Tel Aviv at the end of 2021 was NIS 7,236, 59% higher than the countrywide average (NIS 4,540).

The percentages, however, are somewhat misleading. In money terms, the gap is NIS 2,700 for an apartment of 3.5-4 rooms and NIS 3,600 for a large apartment. What a family saves by being able to live in Tel Aviv without a car for every driver, which it would never be able to do in one of the suburban towns scattered about (in Israel there are on average 1.6 cars per family), easily makes up for the difference in rent.

Tel Aviv residents pay a lot to live in the city that never sleeps, but they also receive a high return (and if they were to burn less money on food deliveries from Wolt, they would feel it more readily in their wallets).

The satellite cities pay

The main problem is that this situation is not really just, certainly when you realize that a large part of the excess return comes from money that flows to Tel Aviv from people who have to live far away from it. But that's the reality, and it isn’t going to change any time soon.

The Tel Aviv municipality can spend generously on its residents, because it receives from every citizen of the country. Thousands of people come every day to work and shop in Tel Aviv, enriching its coffers. Arnona from non-residential spaces contributes 72% of Tel Aviv's revenues, amounting to NIS 2.5 billion annually. In Jerusalem, which has twice as many residents as Tel Aviv, arnona from non-residential spaces contributes just NIS 1.7 billion (53% of total arnona revenues). Incidentally, in 2015, Tel Aviv's poorer neighbor Bat Yam petitioned the High Court of Justice, demanding a fairer distribution of revenues (in Bat Yam, non-residential arnona amounts to just NIS 134 million annually, 43% of the municipality's revenues). A special government commission recommended simply unifying the two cities, but the idea evaporated as though it had never been.

Real estate monster

It's impossible to leave the subject without mentioning that the Tel Aviv municipality is also a real estate monster. It owns 13,361 properties, a figure that no other local authority comes near. It obtained some of these properties from tough negotiation with developers who wanted terribly to build in the city, and some simply accrued to it from the days in which it was surrounded by sand dunes. Last year, for example, Tel Aviv sold land in Hod Hasharon, the "Beit Hana'ara" site, for NIS 511 million. It will shortly sell an adjacent lot, that has been put up for auction at a minimum price of NIS 107 million.

This money flows to Tel Aviv's happy inhabitants. What a shame that all these advantages fuel more and more demand, and, yes, push real estate prices higher and higher.

Published by Globes, Israel business news - - on March 6, 2022.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.

Tel Aviv Photo: Shutterstock
Tel Aviv Photo: Shutterstock
Twitter Facebook Linkedin RSS Newsletters גלובס Israel Business Conference 2018