Rising Home Prices Now Reaching Poorer Areas

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The run-up in housing prices is starting to reach Israel's poorest neighborhoods as property speculators looked for new, untapped neighborhoods to invest in, a survey conducted by TheMarker and the Yad2 website has found.

The neighborhood snowing the sharpest price rise in the first seven months of the year is Kiryat Moshe in southeast Rehovot, close to Derech Hayam. It's an area where the buildings were constructed to a low standard and are poorly maintained. About half the population are Ethiopians.

But Kiryat Moshe has seen prices shoot up by some 18% since the start of the year, so that a three-room apartment is now selling for an average of NIS 844,000, according to TheMarker-Yad2 survey.

Other poorer neighborhoods seeing sharp price increases this year include Hadar Hacarmel and the Lower City in Haifa, where prices have risen 14%, to an average of NIS 8,801 per square meter.

In Tel Aviv, where price rises have moderated for the most expensive neighborhoods, the city's Jaffa, Kiryat Shalom, Yad Eliyahu and Neveh Barbour sections have risen 5.8% in price, to an average of NIS 15,956 a square meter. That is high compared to other low-income areas, but not compared to the Tel Aviv average: NIS 24,137 per square meter, the highest in the country.

In July alone, Ramle registered a 3.3% increase to NIS 10,351 per square meter, with Acre up 3.7% to NIS 7,236.

Rising prices in poorer towns and neighborhoods come amid a general slowing down of price increases for homes, TheMarker-Yad2 survey found. Of the 31 cities examined, 18 showed changes of 1% or less in prices. Rehovot's Kiryat Moshe as well as the two Haifa neighborhoods appear to have caught investors' attention because they offer a combination of proximity to greater Tel Aviv and returns that approach those of investment properties in the periphery.

At the start of the year a two-room apartment in Kiryat Moshe offered an annual return of 5%, i.e., net rental income as a percentage of the purchase price. Those have since declined to 4.5% as prices have risen. In Hadar Hacarmel and the Lower City, prices have similarly cut into returns, from 5.5% to less than 5%.

A two-room apartment in Ashkelon returns 5.9% annually, in Acre 5.7% and Be'er Sheva 5.4%. But because most investors live in greater Tel Aviv, the lower returns in Kiryat Moshe are offset by the shorter driving distances for owners looking after their properties.

Hamal Street in Haifa's Lower City. Credit: Eyal Toueg

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