The simultaneous boom in both markets is not coincidental. A survey by international property management company CBRE finds that office rents in Tel Aviv reached NIS 130 per square meter in June, which compares with NIS 90 in Ramat Gan, NIS 89 in Herzliya, NIS 55 in Petah Tikva, and NIS 50 in Holon. It too has opened up a wide gap versus the neighbors. In other places in the world, when prices rise, the young go somewhere else."Īll this is closely connected to the office market in Tel Aviv. As a result, investors are prepared to pay more for apartments in Tel Aviv, and companies looking for workers in high tech also come to Tel Aviv, and create a situation that has no parallel anywhere in the world, of constantly rising office prices, and occupation rates close to 100%. They think that there’s some benefit to living in Tel Aviv, and generally there isn’t. Danny Czamanski of the Faculty of Economics and Business Administration at the Ruppin Academic Center, says, "This is irrational behavior on the part of young people, who are not prepared to live in Hadera or Netanya they want Tel Aviv. Apartment prices, on the other hand, are determined by, among other things, market trends and expectations." RELATED ARTICLESĪs far as tenants are concerned, Duchin says, "The branding of Tel Aviv is such that people are prepared to pay, and there are tenants who make the calculation and conclude that the costs of moving to apartments elsewhere are such that it’s better for them to absorb the rise in rents."
"Rents reflect the value of the housing services that you receive, and that ratio has remained more or less the same, because there has been no substantial change in this market. Yair Duchin, who heads the Real Estate Financing MBA program at the Hebrew University of Jerusalem Business School. "This shows that there is a bubble element in apartment prices in Tel Aviv," says Dr. This year, the average return is below 2%, a 30-year low.
Before the Covid-19 pandemic, an investor could obtain an annual return of 2.5% on an apartment in Tel Aviv. The high rate of purchase price rises in comparison with the rise in rents has led to a substantial fall in rental returns for investment buyers in recent years. That is to say, rents in Tel Aviv are about 30% higher than in Ramat Gan, and nearly 70% higher than in Petah Tikva. This compares with NIS 5,725 in Ramat Gan, NIS 4,730 in Rishon Lezion, NIS 4,404 in Petah Tikva, NIS 4,803 in Holon, and NIS 4,597 in Bat Yam. While the gap between home prices in Tel Aviv and its neighbors has widened, the rent gap has remained fairly stable.Īccording to the Central Bureau of Statistics, the average monthly rent for a four-room apartment in Tel Aviv is NIS 7,368. Only two years ago, the difference was up to NIS 1.6 million, which is substantial, but far from what we have been seeing since Covid-19 became part of our lives. Someone who buys a four-room apartment in Tel Aviv today is prepared to pay sometimes NIS 2 million more than in the neighboring cities that have been examined.
Over the same period, in five cities around Tel Aviv, the price rise was 15-32%. Will inflation and the global economic situation cool the Tel Aviv market? That is at least one scenario.Ĭentral Bureau of Statistics data show that between the second quarter of 2020 and the first quarter of 2022, the average price of a four-room apartment in Tel Aviv rose by 43% to NIS 4.7 million. From checks made by "Globes" it emerges that in the three years up to the Covid-19 pandemic, the relationship between home prices in Tel Aviv and those in neighboring cities was fairly stable, and that the gap widened after the pandemic broke out, at the same time as a similar phenomenon took hold in office rents.
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