Report: Fewer Young Couples Can Buy Apartments in Tel Aviv Suburbs

As home prices continue to rise, MKs establish lobby to protect renters

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Figures released on Wednesday in the Knesset and in a report prepared for TheMarker sharply illustrated the distress home-buyers and people renting apartments are feeling as residential real estate prices surge higher.

A survey of the home prices conducted for TheMarker by the Madlan property website found that in the Tel Aviv suburb of Rishon Lezion, only 3% of all four-room houses sold for less than 1.2 million shekels, down from 36% four years earlier. The average price for a new four-room home rose to 1.9 million shekels ($546,000) last year, from 1.3 million shekels in 2009.

While the numbers don’t produce any surprises, they illustrate how a home is becoming out of reach for young families seeking to live in the center of the country.

Raveh Eytan, Madlan’s vice president of research and strategy, said the cost of a four-room unit – the size favored by young couples – the popular terms for first-time home buyers had effectively pushed them out of the market.

“In Rishon Lezion we found that from the moment that it became impossible to buy apartments at prices affordable to young couples, demand changed. Young couples are no longer in the game, so there’s no demand for four-room units,” he said.

Developers are now focused on building the five-room homes favored by older families seeking to upgrade their housing. “This has led to more expensive housing and higher prices,” he said.

Rishon Lezion wasn’t alone is seeing prices balloon. In the Em Hamoshava section of Petah Tikva, for instance, four-room homes could be purchased in 2009 for 1.16 million shekels; by last year the price had reached an average of 1.59 million shekels, according to Maldan. The 430,000-shekel increase would require the buyer to add 110,000 shekels to the down payment, and if the rest were paid for by a mortgage would cost him or her 1,500 shekels a month.

In Holon, another Tel Aviv suburb, 42% of all four-room houses sold for less than 1.2 million shekels, a figure that had fallen to 6% in 2013. In Netanya, a coastal resort town, 72% of homes were sold four years ago for less than 1.2 million shekels. In 2013, just 4% changed hands for that price or less.

In the rental market, the situation for people seeking a roof over their heads was similarly bleak.

Lawmakers met at the Knesset on Wednesday to launch a lobby for the advancement of fair rent. A report prepared by the Knesset Research and Information Center found that rents across the country had jumped 49% since 2007, and in Tel Aviv by 67%. The report said Israel lagged other developed economies in the extent it regulated the rental market.

MKs Stav Shaffir and Hilik Bar (Labor) and Orly Levi-Abekasis (Yisrael Beiteinu), who launched the new lobby, also unveiled private members bills that would regulate landlord-tenant relations. It would put a 3% cap on annual rent increases and encourage landlords to rent out apartments for the long term.

Saffir held up her own rental contract at the meeting and declared: “A contract like this is held by two million people in Israel, none of whom have protection. All over the Western world they’ve long understood that you need to protector renters.”

In a related development, the Knesset Interior and Environment Committee on Wednesday approved by a vote of nine to four the first major changes in the Planning and Building Law since 1965. It will go to the Knesset plenum in about two weeks for its second and third readings before becoming law on August 1.

The amended law expands the authority of local planning committees, enabling them to approve a wider range of building plans. It does away with the need for building permits for a list of structures delineated in the law, including pergolas, simple shelters for cars and fences.

The legislation also requires the government to set targets for an adequate supply of affordable housing.

“This is an historic day,” said Miri Regev (Likud), the committee’s chairwoman. “Since 1965 no major reforms of the Planning and Building Law have been undertaken … by increasing the powers of the local authorities chosen by the public, who can now actualize their vision of their cities without having to get the approval of regional committees.”

A typical Israeli apartment block. Four-room apartments in Tel Aviv suburbs have become prohibitively expensive for most young couples. Credit: Tomer Appelbaum

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