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A recent tender issued by the Israel Lands Authority (ILA) to sell 20 plots in the Renanim neighborhood of eastern Arad attracted only two bidders.

A 560-square meter plot sold for NIS 197,000, while a half-dunam (1/8-acre) plot went for about NIS 200,000, both inclusive of development costs. That's pretty poor.

This was not the first time that ILA tenders for land in Arad went badly, and the situation is now as bad as it has ever been. Since 2000 every ILA tender in Arad has failed but two, involving the construction of about 130 apartments.

Eliezer Bar-Sadeh, editor of the local Hatzvi newspaper, says that the town began losing its luster with the large-scale Russian immigration.

"All at once, the town's population increased by tens of percentage points, far faster than it could handle. Another process that has sunk the city has been the abandonment by many of the town's original residents. These are older people who followed their children out of the town after they reached retirement age. "As a result, we lost a strong population, who left for places like Yavneh and Modi'in", he says.

This is not an uncommon story in southern Israel. Bar-Sadeh says that towns like Dimona and Yeroham are not growing because cheap housing alone is insufficient to attract a strong population. Good schools and a vibrant community life are needed to complete the picture, and these are currently missing.

The results of the recent tender come as no surprise to local real estate agents. "It's a neighborhood where similar plots were sold in the past, but people didn't build and are now trying to sell off the land," explains Olga Michaelov of Natasha Realty. "Many plots, mostly of a half dunam, have been up for sale for some time for between NIS 140,000 and NIS 150,000, but there are no buyers," Michaelov said.

There are no contractor apartments available in town, because contractors simply do not build in Arad anymore. The builders that have attempted to do so in recent years have found that they cannot turn a profit.

Machluf Bechur, a contracting company involved in a number of projects in the south, was the last firm to try to construct a luxury residential building, or even private homes in Arad. It was unable to come even close to its asking price for their properties. Private homes constructed by Machluf Bechur were put on the market for NIS 680,000, but were sold in the end for an average of just NIS 480,000. Marketing of the project ended about a year ago.

Nevertheless, Michaelov says, there has been a slight improvement recently: "Demand has increased a little simply because the supply is very limited, and the younger demographic needs apartments. In addition, there has been an influx of religious residents, and even religious investors are willing to buy apartments if they are selling for up to NIS 150,000," Michaelov says. Earning between 7% and 8% on rentals, by the way, is not an uncommon occurrence in Arad, "although in real terms, annual earnings are not great, so there are not too many investors in Arad, in spite of the high returns," Michaelov says.