Price of Four-room Flats in Tel Aviv Jumped 11% Last Year, Gov't Appraiser Finds

As the middle class takes to the streets to protest the cost of living, new data shows the average home price in Israel increased 5% between the first quarter of 2012 and the first quarter of 2013.

Home prices are continuing to climb sharply, the government appraiser announced this week.

While the middle class is returning to the streets to protest tax hikes and the cost of living, appraiser Tal Eldroti released figures showing that average home prices increased 5% between the first quarter of 2012 and the first quarter of 2013 in the 16 cities he checked, and 0.9% between the last quarter of 2012 and the first quarter of 2013.

Eldroti's report is unique in that it refers only to four-room apartments, which are considered relatively homogenous, and thus eliminates other factors that could influence home price. It also examines homes in only 16 cities, places considered large enough to offer a statistically significant sample. These methods are considered to be among the most accurate of those currently used to review the country's home prices.

The Housing and Construction Ministry, by comparison, aggregates data on three- to five-room apartments around the country, while the Central Bureau of Statistics regularly aggregates data on all apartments with up to five rooms.

Eldroti found the sharpest price increases in Tel Aviv. There, the price of four-room apartments jumped 11% between the first quarter of 2012 and the first quarter of 2013. The average four-room apartment in Tel Aviv sold for NIS 2.56 million as of the first quarter of this year. Prices also jumped a full 2% between the last quarter of 2012 and the first quarter of this year

Since the first quarter of 2008, the price of four-room apartments in Tel Aviv is up 57%.

In Be'er Sheva, four-room apartments became 8% more expensive over the past year, and now sell for an average of NIS 788,000. Prices have increased 60% since the first quarter of 2008.

In Haifa, four-room apartments were selling for an average of NIS 1.21 million as of the first quarter, an increase of 7% over the past year but a decrease of 1% since the final quarter of 2012. Prices there have increased 63% since 2008, the sharpest rate among the cities reviewed by Eldroti.

Prices increased at a similar pace in Ashdod, where four-room flats were selling for an average of NIS 1.22 million as of the first quarter, a 4% increase since the final quarter of 2012 – the largest jump for that quarter, according to Eldroti's data. Overall, prices in the city have increased at a relatively moderate pace of 40% since 2008.

Prices increased 6% over the past year in Eilat (NIS 911,000 on average), Herzliya (NIS 1.88 million), Modi'in (NIS 1.45 million), Netanya (NIS 1.32 million) and Rehovot (NIS 1.3 million). In Ashkelon, however, prices did not change since the first or last quarter of 2012, with the average price of a four-room apartment remaining at NIS 818,000. That's about 1% less than the average price there at the end of 2011, before the cost-of-living protests broke out.

In Jerusalem, four-bedroom homes averaged NIS 1.79 million, a 4% increase since the previous quarter, as well as the first quarter of 2012. In Kfar Sava, prices increased 5% for the year, to NIS 1.6 million.

The data indicates that the quick pace of price increases observed over the past several years is slowing. Only a few years ago, paying NIS 1.07 million for a four-room apartment in a city was considered impossible.

Eldroti noted that his report reviews the period of time when the Bank of Israel's regulations making mortgage terms more stringent took effect, but added that it did not appear to have an effect on prices. He noted that the survey did not find that there were fewer transactions or dropping prices, as could have been expected had these restrictions made it harder to buy.

However, the supply of available homes contracted in 2012, as housing starts slowed but demand remained high, he noted. That said, in this quarter there was no change in the number of new, unsold homes available. As of March, that figure was 20,350, he said.

The first quarter of this year was also a time of uncertainty – the country held elections and people were waiting to see what the new government would do – and the global economy is in a state of upheaval, he noted.

Yet none of this explains what has been happening in Tel Aviv, where prices rose sharply. Prices of four-room apartments there have increased 11.5% since the cost-of-living protests termed it a "city for the rich." Eldroti found some of Israel's sharpest price differences in Tel Aviv. There, the standard deviation of home prices is the highest out of any city reviewed – 34% – due to the huge gaps between the price of apartments in luxury towers and those in less desirable neighborhoods, such as those in the south of the city. 

Real estate properties in Tel Aviv.
Ofer Vaknin