Housing prices in Israel have been levelling off in recent months, but are plateauing at a level far beyond the reach of many buyers. In most places, homes cost over 1 million shekels ($286,861). In out-of-the-way places, builders enthusiastically place ads for homes being built for 800,000 shekels, but they would have cost half that amount a few short years ago. On top of the high prices, the Bank of Israel has been toughening conditions for taking out a mortgage, making it even harder for prospective buyers struggling to find capital.
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Sarit and Roy Mualem have been house hunting for a year and a half. “We haven’t found anything because of the prices,” says Roy. “By the time we saved enough to buy a home we saw in Petah Tikva for 1.1 million shekels, the price had already climbed to 1.3 million shekels.”
They have no choice but to live with their daughter in a house owned by their family and therefore don’t have to pay rent, but it won’t be at their disposal forever because the next siblings in line will need to use it, too. Sooner or later, they’ll need to find a home of their own.
Sarit is prepared to follow her brother to Kiryat Gat, some 35 miles (56 kilometers) south of Tel Aviv. “I’m ready to sacrifice being near to my family in order for us to have our own home,” she says. But Roy insists on staying close to their parents in the greater Tel Aviv area. “She doesn’t see it yet, but on Fridays when we want a babysitter, there won’t be anyone who will be able to come at five minutes’ notice,” he says.
Many young couples share the same problem as the Mualems – and without the luxury of a family-owned apartment that gives a temporary reprieve from skyrocketing home prices. Many younger families find they have little choice but to buy a home far from the Tel Aviv area in the center of the country, putting them far away from their places of work and extended families. Even in these places, prices are climbing as the exodus spurs demand in outlying communities.
Amid the brochures and posters sporting smiling and attractive young families, and the enthusiastic sales pitches at a Tel Aviv housing fair last month, the painful dilemmas faced by the Mualems and hundreds of others was the real story of Israel’s real estate market.
The exhibit at the Israel Trade Fairs Center was organized by the Israel Building Center, a contractors trade association.
Climbing prices have seen homes as far as Netanya – 18 miles (30 kilometers) to the north – and Gedera – 27 miles (43 kilometers) to the south – priced at 1.2 million shekels. The Mualems want a new apartment, but not necessarily in a new neighborhood, and are looking to buy from a builder. A new building in a city center would also meet their needs. A secondhand apartment doesn’t interest them.
“An old three-room apartment in Petah Tikva costs 1 million shekels and a new one costs 1.05 million shekels – it’s nearly the same price,” explains Roy. “But when you buy an apartment in the pre-construction phase, its price goes up. By the time you receive the keys in two years, the price will be 150,000 shekels more than what you paid for it.”
The couple left the fair disappointed. “We expected sales and discounts because the fair was called ‘The apartments and opportunities exhibit,’” Roy notes. “We sat with a builder from Rosh Ha’ayin to see three-room and four-room apartments, and he tells us he only has penthouses left.”
Ifat and Yossi, a couple in their early 30s with two small children, live with their parents – “like the whole nation of Israel,” declares Ifat – in Rishon Letzion, 5 miles (8 kilometers) south of Tel Aviv. “It seems like a lot of people live with their parents," she says. "We’re trying to save money on rent, but it’s still hard.”
The couple is looking for a four-room apartment and has long given up on their dream of living in Rishon Letzion itself. “The lowest price we found was for a four-room apartment in Rishon Letzion, and that was 1.3 million to 1.4 million shekels,” Yossi says. So they widened their search to Be’er Yaakov, 13 miles (21 kilometers) southeast of Tel Aviv. But there, too, they ran up against prices in the range of 1.2 million to 1.3 million shekels.
What’s the solution? Ifat and Yossi don’t know how to respond. Even a secondhand apartment isn’t a solution for them. “A new apartment in Be’er Yaakov costs the same as a secondhand apartment in Rishon Letzion,” Ifat says. “It’s cheaper to buy pre-construction because at least the prices go up, and we don’t have any problem waiting for the builder to finish putting up the building.”
Not more economical to rent
Itai is an economist working at an investment bank and his wife is in the civil service. In their mid-30s, both run their lives meticulously. They live with their three children in an apartment in Holon, just to the south of Tel Aviv, paying 5,000 shekels a month rent. Their goal is to buy a five-room apartment in the same town or in the area of Nes Tziona (adjacent to Rishon Letzion). They’re starting to look now, before their twins start first grade in a year and a half.
Itai and his wife have accumulated much more capital than most couples their age – the fruit of hard work and a frugal lifestyle. Maybe that’s why there’s bitterness in Itai’s tone. “I’ve lived modestly for 10 years, and in the end what can I buy? A simple apartment, nothing more,” he says. “Acting responsibly as we have, we should have expected to be able to buy a detached home. But no. Compared to my peers I’ve lived simply, but compared to someone who bought an apartment in 2008 or earlier, I’m worse off on paper. They’re worth more.”
The couple says they’re smart consumers. For example, they only buy diapers and baby formula on special offer, manage with one car and don’t subscribe to cable television. “We aren’t ascetics and don’t lack for anything, but we don’t have a rich uncle and haven’t won the lottery – so how can we buy a home?” Itai complains.
Itai and his wife once bought an apartment but when it rose enough in value, they sold it eight years ago in the hopes of moving up to a better home. Mortgage payments were higher than rent, so they decided to live in a rental. But now that they’re a family of five and the children approach school age, they want a house they can call a home of their home.
They missed the big upswings in prices and Itai is already used to rattling off his explanation for a decision that turned out to be mistaken. “I thought it was more economical to rent, but I was wrong,” he says. “I didn’t know prices would take off like that.”
Bella and Yevgeni are in much better financial shape than most young couples. They live with their two children in a four-room apartment in Petah Tikva’s Em Hamoshavot neighborhood and aspire to an apartment of five-and-a-half or six rooms. They expect that the cost of a bigger and nicer home will reach to between 500,000 shekels and 1 million shekels, and are considering moving to Hod Hasharon or Kfar Sava. “We know exactly where we stand, so we’re being choosy and don’t want to compromise,” Bella says.
Bella and Yevgeni refuse to look at secondhand homes. “Homes bought on paper are cheaper, and you can change the layout as you please if it’s bought at an early enough stage,” says Bella. She claims to be a sophisticated real estate consumer, monitoring the projects of builders through the Internet, and savvy on all the market data. She visits all the construction sites and checks the types of apartments available, their blueprints and the changes that can be made to them.
As a result, she came to the fair with little expectation of learning anything new. “I’ve been looking for an apartment for a year, so if there’s a project I’m not aware of, it hasn’t been put on the market yet,” she says.