Part 1 - The North's Thriving Communities

The enormous demand for housing in Israel is leading many communities to welcome new residents in numbers that will more than double their population. The first in a series of three articles about northern Israel's real estate market.

Israel’s population is growing by 1.5% a year, but a survey conducted by the urban-economic consulting firm Svivot Megurim found that in some communities there is an annual growth of 5%, equivalent to a doubling of their population by 2030.

This accelerated construction is reflected in the thousands of new housing units being built in small communities and in small and mid-size towns. According to real estate appraiser and attorney Haim Mesilati, a population that is doubled over a short time period has unprecedented consequences for any community. The implications of accelerated development are usually positive, often reflected in an upgrading of a town’s image, with an influx of a young and well-established population, upgraded infrastructure and expanded public services. These are important tools for bringing about urban renewal that carries with it public and national benefits, in the form of an increase in the number of available housing units. The vast majority of communities slated for accelerated development are not located in traditional high-demand areas, leading to relatively reasonable prices.

Nevertheless, a massive addition to the available pool of apartments entails a non-negligible economic risk. Individual households usually constitute net losses to local authorities since property taxes don’t cover municipal expenses. The key to financial resilience lies in the extent of commercial and industrial areas that are included in a local authority’s jurisdiction. Thus, municipalities that are interested in maintaining a sound economic basis while providing residents with high-quality services must ensure that thousands of new residential units are supported by business-oriented real estate as well.

These are some of the communities and towns that are expected to double in size:

Afula

Current population: 42,000; projected population in 2030: 85,000, a 102% growth. Price of a new 4-room apartment: 869,000 shekels ($223,000).

High housing costs have expanded the areas in which buyers are interested, leading to an efflux of population from the center of the country to its periphery. One of the major beneficiaries of this trend is the town of Afula, in which a 5-room apartment can still be purchased for one million shekels (just over $250,000). The city is a regional center providing services to the surrounding region, and accessibility to the country’s center has greatly improved since the opening of Highway 6. The Jezreel Valley train, which will start operating at the end of this year, will serve as a springboard into the city, shortening travel times for residents going to the metropolitan employment hub of Haifa.

Afula ranked sixth in the number of apartment sales across Israel in 2015. 993 apartments were sold, an all-time record that marked a 3-fold increase in comparison to the preceding year. Afula saw more sales than some large cities, such as Rosh HaAyin, which had 878 sales, Rishon LeZion (436), Haifa (670) and Herzliya (387). Afula ranks third in the number of housing starts in 2015, with 1,500 units currently under construction. Only Tel Aviv and Jerusalem had more.

The Yizrael (Jezreel) neighborhood is now the main focus of real estate attention, along with the C1 and 17,000 quarters that are still in the planning stage. A high-tech park is planned for the city, which will significantly increase employment opportunities. Afula is currently in the midst of negotiating the addition of 10,000 housing units to the city, as well as infrastructure renewal in the older parts of the city.

Among the more noteworthy projects in the city is the renewal of the old train station in the city’s center. It was first built in 1905 during Ottoman times. At the end of this project, the station will be a leisure and entertainment center and a focal point for tourists, with bike paths and other attractions, all of which will serve city residents as well as visitors.

Kfar Vradim

Current population: 6,000; projeced population in 2030: 14,000, a 140% growth. Price of a new 4-room apartment: 1.2 million shekels ($308,000).

Over the last decade Kfar Vradim saw very little construction, aside from a few detached houses. However, in the near future this prestigious community is expected to undergo major changes. Plans call for a new neighborhood of 700 units, including dense buildings as well as detached homes. Z.F. Construction has won a tender for building 117 units. The company will be the first to start operating in Kfar Vradim and the only one to build in its center, close to existing buildings. The company has just started planning the project, which is expected to follow ecological (‘green’) principles, taking care to protect the environment and reduce energy consumption. Z.F. will build duplexes as well as apartments in stepped buildings.

This is a local authority initiative designed to attract a younger population. The plan calls for apartments priced low, at one million shekels, in order to attract younger couples. Kfar Vradim is close to the Tefen industrial park, which is located 20 km east of Nahariya and 15 km north of Karmiel. Kfar Vradim attracts affluent families from the country’s north partly because of the adjacent nature reserves and the clement weather which prevails most of the year.

The local committee there has recently approved a plan to construct a joint employment center, shared by Kfar Vradim and Ma’alot-Tarshiha. This new area, in the northern part of Kfar Vradim, will cover 115 acres, including 200,000 square meters designated for buildings that will employ the region’s residents: 67,500 square meters are earmarked for offering employment opportunities, 122,000 square meters are designated for industry and 22,000 meters for commerce. The area will have multiple functions, including clean and advanced industries, offices, businesses, institutions and public services, clinics, various centers such as technology training centers, sports facilities and more.

Harish

Current population: 1,500; projected population in 2030: 60,000, a 3,900% growth rate! Price of a new 4-room apartment: one million shekels ($256,000).

After years of talking and unsuccessful marketing, this time it’s really happening – the town of Harish is taking shape. In the coming years, 5,500 housing units will be built there, with 5,000 additional ones at a later stage. In contrast to a decision made by the Housing Minister in 2010, and following widespread public protest, it seems that Harish will be mainly secular. Prices are reasonable, attracting young couples from the center of the country: 4-room apartments are going for one million shekels, with 1.2 million required for an additional room. These prices are 15%-30% lower than asking prices in nearby towns such as Hadera and Pardes Hanna-Karkur. Harish is excellently located, close to the Iron interchange on Highway 6, and its residents will benefit from modern urban planning that will include parks, public buildings, wide sidewalks and bike paths.

Investors identified Harish’s potential a while ago. This is one of the few occasions in which the state agreed to allocate some funds, even before plans that called for zero value-added tax on some new housing or for other forms of subsidized housing. Land was sold for very low prices. “The state’s determination to build a new town and massive marketing of land for a limited time at low prices led to our being able to offer attractive prices for our apartments. Harish hasn’t yet fulfilled its potential,” says Ohad Saban, the deputy VP at Dona Engineering and Construction, a company building more than 1,100 units in Harish.

Saban says that during 2015 demand was very high, with prices continually rising. “We believe that neighborhoods now under construction in Harish, as is the case in Ashkelon, Karmei Gat and Rosh HaAyin, serve as an attractive alternative for anyone wishing to live in the central part of the country or close to it, at reasonable prices. Young couples and families wishing to improve their living standards are no longer fixated on the Tel Aviv area and are looking elsewhere, since there is much more on offer now.”

Kiryat Bialik

Current population: 40,000; projected population in 2030: 90,000, a 125% growth. Price of a new 4-room apartment: 1.35 million shekels ($385,000).

A new bypass road around the Haifa Bay suburbs is driving an accelerated construction spurt in the area. In Kiryat Bialik alone, two new neighborhoods are in the planning, consisting of 9,000 housing units. One, already approved, is called Afek while plans for ‘Bialik in the Park’ have been filed. Afek is located on land that used to belong to Kibbutz Afek. The land was annexed to Kiryat Bialik and occupies its eastern side. 4,500 diverse units will be built there, including rows of cottages as well as dense building, with towers rising from 6 to 23 floors high. In addition, 27,000 square meters of commercial and office space and a central neighborhood park are in the planning.