Chasing the Dream of a Single-family House in Israel: Ways to Make It Affordable

TheMarker talks with Israelis who are coping with high price of buying a home of your own by adding a floor, buying and dividing a house with friends or family, or carving out a separate unit to rent and generate extra income to cover the mortgage.

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A single-family house is the dream of many home-buyers – lots of land, a yard for the kids, no elevator and no leaks from the neighbors’ apartment upstairs. Such houses, however, are increasingly hard to find, and with prices soaring, a house of one’s own is now out of reach for many middle-class families.

There are ways of cutting the cost of buying a single-family house, but they require creative solutions, from buying a single-story property on which a second floor can be added later, to sharing a property lot with friends or relatives. Some buy a house with a rental unit on the lot that helps pay the mortgage.

Amir Yehoshua, 45, a married father of four, rented for 15 years in Ma’aleh Efraim, a Jewish settlement in the northern West Bank. Four- and five-room homes in the settlement sell for 500,000 to 650,000 shekels ($130,000 to $170,000).

Eight months ago the family found a four-room, 90-square-meter (970-square-foot) house for 545,000 shekels through a local office of Anglo-Saxon realty. It was built by Bar Amana, a firm associated with the Amana West Bank settlement movement, Yehoshua says. The single-story house was built on the assumption the buyer would eventually build a second floor, but Yehoshua basically started from scratch.

“There were no stairs in the house, and the second floor was just concrete and not built out or divided into rooms,” he notes. “There are a lot of homes like this in the community that were rented out in the past, and now they’ve been put up for sale.”

But Yehoshua’s costs were very low, certainly compared to what it would cost to buy a similar house in Israel proper, and the 130,000 shekels he spent on renovations was particularly low. “I hired a contractor to install the floor and another contractor to install the windows, and the renovation was performed by an excellent Arab worker who lives in a village near us. I also bought the material by myself in Arab villages and in Ariel,” he says.

The renovation costs included not only the addition of the second floor, stairs and windows, but also furniture, a new kitchen and refrigerator. In March the family moved in to what is now a six-room villa on two floors.

Little house, big lot

Houses not built out to the maximum set by local zoning ordinance, enabling buyers to expand them, are not common in Israel, but they can sometimes be found in projects designed for young, growing families. The developer opts to reduce the size of the home to keep the price down for young, first-time buyers who can create more space as their families and incomes grow.

In a similar vein, America-Israel Cottages is selling homes in what it calls the Unique Village project in Pardesiya east of Netanya. Buyers have an option to build a second floor or forgo a basement.

The single-family homes sit on 200- to 250-square-meter lots, and the homes themselves are 160 square meters, meaning two stories, each of 80 square meters, with a 45-meter basement. The first floor has a kitchen, living room and security shelter, and the second floor has four bedrooms. The price ranges between 2.55 million and 2.85 million shekels, says Dror Toren of America-Israel Investments.

Forgoing a basement can save the buyer 300,000 shekels. The problem is that you can’t go back and add a basement later, says Toren, so most buyers choose to pay and get 45 square meters of extra floor space. The second option is to forgo a second story and make do with a smaller 100-square-meter, one-and-a-half story house for about 2.05 million shekels. “It’s not a major difference, but it’s enough to determine if the couple can buy the house or not,” explains Toren.

In apartment projects in the Tel Aviv suburbs of Ramat Gan and Petah Tikva, notes Toren, prices are always quoted as “starting at” because there’s a wide range of units and amenities. At the project in Pardesiya, the houses are rather uniform, with prices between 2.35 million and 2.55 million shekels.

“It’s a narrow range, so the contractor also has to limit his options. We came to the conclusion that 35-year-olds who sell a home don’t have such a sum to invest, and they also don’t always need a six-room home, because they only have one or two children. On the other hand, they want the location and the possibility for the house to be adaptable for a larger family. They don’t want to move to another house or another city,” he says.

Mi casa es su casa

Yonit Ozeri of Petah Tikva had a particularly creative idea about how she could realize her dream of a house on its own lot. She and her husband decided they could buy a house that they would divide up and share with relatives. The Ozeris have no children and have been living in a three-and-a-half-room apartment in Petah Tikva, but she always wanted a private home.

The first person she approached was her brother, who lives in an old, outmoded building in Petah Tikva supposedly slated for urban renewal, she explains. “But we’ve heard about ‘the future’ now for many years,” she adds. Her brother is in a 65-square-meter apartment and has three children, the youngest of whom is three and a half and sleeps in his parents’ bedroom. When the older children bring friends over there’s no place for them to hang out.

Ozeri’s idea is to give each family half the living space in the new house, planned on their needs. They are looking, but not in Petah Tikva, she says, because it’s too expensive. “We almost found a house in Petah Tikva, an abandoned building that we would have had to tear down and build from scratch. They were asking 2.2 million shekels for it. An appraiser estimated the cost of the house and construction at 4 million shekels, 2 million per family – and that’s very expensive. Our budget is about a million shekels per family,” she explains.

A joint purchase by two families is not simple. They would have to settle on a location and a price, which means meeting everyone’s budget and proximity to workplace.

Another option is a private house with a separate apartment that can be rented out. Usually such units are in the basement, but buyers should watch out because it may not legal.

Israel Pasternak, CEO of the Israeli Building Center, estimates that about 1,000 such units are created every year in Israel as part of remodeling or expansion projects.

Orly Manshar, who owns the Reshef realty office serving the northeast Tel Aviv suburbs of Kfar Sava and Hod Hasharon, says house buyers are usually people who already own a home and are trading up to a better one. “House prices in Hod Hasharon are very high so you need a lot of your own capital, which property owners have.”

The problem with property owners who are looking to trade up to a private house, she explains, is that they usually need to take on a larger mortgage, which comes with a bigger monthly payment.

“These are usually families with children and with set monthly expenses. In many instances, they have no way to come up with another several thousand shekels to cover a bigger mortgage, but a house with a rental unit that produces additional income can be the solution. Some people don’t rent out the unit, but make it into a home office, which saves them expenses. They don’t have to rent an office and don’t have a commute – and the expense can be a deductible for tax purposes.”