The Periphery Strikes Back / Real Estate Rebounds in Ramle, Lod and Tiberias

Arik Mirovsky
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Arik Mirovsky

Warnings about a bubble in Israeli property prices don't seem to have moved buyers: Prices have continued to rise.

As the country becomes increasingly crowded, more housing units will have to be built.

Rents in most major cities in the center of the country have climbed 3%-6% since the start of 2010.

The figures from the May real estate price index of TheMarker and the Yad2 website show that even the Bank of Israel's recent statements that it will make mortgages for an amount that exceeds 60% of the value of the property much more expensive have not lowered buyers' interest. The Tax Authority has also announced that it plans to raise the purchase tax on investment properties.

The three cities with the greatest increase in apartment prices in 2010 are all considered to be less than desirable, although the first two are definitely in the center of country: Ramle, Lod and Tiberias, where housing prices have risen by 11% to 14% so far this year. Prices in Haifa have leveled out, as have those in Israel's most expensive city, Givatayim.

Of the 31 cities in the housing index, there was a decline - in most cases a minor one - in average home prices in only about one third.

The average increase in home prices for May was around 2%, but in several places the increases were much larger.

In Ramle the average price increase was 4.6%. The price of 5-room apartments rose by up to 7.2%, while 3-room apartments were 3.8% more expensive than in April. Next door, in Lod, prices rose by 4% on average, with greater increases in the prices of larger apartments.

Home prices in the northern city of Tiberias rose from an average of NIS 3,976 per square meter at the start of the year to NIS 4,430 per square meter in May.

But in Jerusalem prices fell by an average of 1.4%, with bigger apartments dropping more. Tel Aviv prices were down by 0.2%. The average increase for Israel's 10 largest cities was only 0.7% in May, similar to April, pointing to price stabilization, at least temporarily.

Haifa prices fell even further, by 2% on average and by nearly 7% for 3-room apartments. That city, however, still holds the prize for the biggest gains in housing prices over the past two years: 40%.

Prices in Be'er Sheva, known as a haven for investors, were almost unchanged.

The community with the greatest rise in home prices, after Ramle, Lod and Tiberias, was the Haifa suburb of Kiryat Bialik, with an average increase of 10.5% in the year to date. Prices in Herzliya climbed 9%, while Kiryat Motzkin, Rehovot, Holon and Ramat Gan all recorded increases of 7.6%. Ramat Gan topped the list in April.

Rents drop in May

Rents in May fell in half the cities surveyed, including Tel Aviv and Rishon Letzion, but not by much in most cases. The average rent for a 3-room apartment in Tel Avi last month was NIS 4,437 per month. That's 2% less than in April but nevertheless slightly more than in January.

In Be'er Sheva, which is considered prime for buying rental properties as an investment, too, rents rose 6% since January, to NIS 2,101 a month.

The high cost of buying an apartment in Tel Aviv is driving young people out of the city, the survey shows. The most sought after 4-room apartments are those in Rishon Letzion, where comparable apartments sell for NIS 400,000 less than in Tel Aviv. Haifa is still in high demand for young people.

But all that goes only for buying apartments. Renters are moving in the opposite direction: They want to live in Tel Aviv: Rentals there and in the adjacent communities of Ramat Gan and Givatayim drew the greatest interest of those using the Yad2 website.

Finally, where should you buy an apartment to rent out as an investment? Acre stillleads the table in returns on investment, with an annual return of 6.6%. As one might guess, the investment leaders are usually places with low purchase prices but relatively high rents. Kiryat Motzkin, Kiryat Ata and Nahariya had returns ranging from 5.8% to 5.9%.

Also in the top 10 in returns were (in order ) Ashkelon, Ramle, Lod, Hadera and Be'er Sheva.