“For more than 20 years, my mother, my sister and I lived in an old apartment in Herzliya, and we paid 5,000 shekels ($1,500) a month in rent. The apartment was in a row house built in the 1950s, in a plain-looking neighborhood that wasn’t so pleasant to walk through at night. At some point we decided we’d had enough and chose to significantly improve our quality of life, even if this meant moving many kilometers away from the place we grew up,” says Inbar Alon, 26, at the family’s dwelling for the past four years in Kiryat Haim.
“We looked for a new place, something pleasant and affordable, and we found it here in the Haifa Bay suburbs. Although we have no roots here, with no family or friends nearby, we could afford to buy a detached 120-square-meter (1,290 square foot) house, with five rooms and a large garden. We arranged a separate unit for me which gives me all the privacy I need. We paid 1.05 million shekels for the house, which is a few minutes by foot from the train station. The old apartment we had in Herzliya is worth at least double what we paid for this one,” Alon says.
Since settling in Kiryat Haim, Alon has become a real estate agent. She is now the franchisee for Re/Max Family in the Haifa suburbs. She says that since assuming her new job she’s discovered that her family was not alone. “There’s a sense that more and more people are starting to be fed up with living in an expensive bubble in the center of the country, in high-priced and overcrowded apartments, and are starting to look for a better quality of life, even if this means relocating away from the in-demand areas. In the Haifa Bay region, we’ve been witnessing significant positive migration in recent years as people leave nearby cities such as Haifa and Nahariya, but also from central Israel. This is due to the single-family homes here, and the real estate prices, which are cheaper by tens of percentage points even when compared to nearby Haifa.”
For many people, having a private home with a yard is the local version of the American dream, a symbol of spaciousness and quality of life. In the wake of the pandemic, the demand for detached single-family homes has surged. According to the Yad2 website, there has been a 130% spike in demand for such homes since March 2020. But the supply is limited, while Israel’s demand for housing is surging and planning authorities are pushing high-density construction. Prices have risen accordingly.
How far will they go?
In order to buy a private house for up to 1.5 million shekels, Israelis have to move to outlying areas far from central Israel such as Yeruham, Mitzpeh Ramon, Kiryat Shmona, Katzrin, Ofakim, Dimona or Sderot. If you can afford as much as 3 million shekels – the price of an average apartment in the greater Tel Aviv area – the possibilities expand to include locations closer to central Israel.
One prominent destination is Be’er Sheva, which has received significant interest from real estate investors, due to its relatively attractive prices. “The market for villas in the region, including in the nearby communities of Omer, Meitar and Lehavim, is constantly growing,” says Tomer Bohbout, a franchisee of the Anglo-Saxon real estate agency chain in the city. “This market is driven by young people who grew up here coming back to live, current residents upgrading to bigger homes, and even families and couples from central Israel. Beside the coronavirus, which gave this market a significant push and increased the demand for private homes, it seems that what changed the rules of the game in Be’er Sheva was the transportation infrastructure, which has been significantly improved. With Highway 6 and the train, most employment centers in central Israel are only an hour away, which lets people live here even if their job remains in the center. They realize that they can live here in a detached home on a half-dunam (0.12 acre) plot, for the price they would pay for an average apartment in Rishon Letzion or Tel Aviv,” he says.
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According to Bohbout, “In Be’er Sheva proper, most of the demand comes from city residents or returning residents, whereas people coming from central Israel prefer outlying communities such as Omer or Lehavim, which are considered classier.” In practice, the price difference between these two options is marginal. According to Tax Authority figures published on the Madlan website, a new 150- to 200-square-meter single-family home in a newer neighborhood in Be’er Sheva such as Kalaniyot or Neot Gan, costs between 2 million to 2.7 million shekels on average. The price for similar-sized second-hand properties has been around 1.8 million shekels over the past decade. In the Ramot neighborhood in the northern part of the city, the price of older detached homes is 1.5 million shekels. In Lehavim and Omer, the average price of a single-family home is around 2.1 million to 2.2 million shekels, respectively. There, buyers get much larger plots, ranging from 200 to 600 square meters, much more than inner-city plots.
Along with Be’er Sheva, other places with notable single-family home offerings for less than 3 million shekels include Ashkelon, Hadera, Pardes Hannah-Karkur and the Haifa Bay area towns. In the first three locations, detached homes cost around 2.5 million to 2.6 million shekels on average, reflecting a 5% price increase in Hadera and Ashkelon over the past year, and a 2% increase in Pardes Hannah-Karkur.
Realtors blame the coronavirus for the price increases. “Since the first and second waves of the pandemic, more people have been coming to this area, and properties are being snatched up,” says Yaniv Godfried, Anglo-Saxon’s franchisee in Pardes Hannah-Karkur. “Even before this crisis, Pardes Hannah became somewhat attractive to buyers from central Israel, with its strong community, its cultural life, its cafés and restaurants, but prices remained static. Over the last few months, however, demand has grown significantly and the supply has dwindled, so at least two or three buyers are now fighting over every property, with prices rising accordingly. There’s a strong trend of buyers coming from the center of the country, people fleeing the overcrowding and small apartments, looking for more space and greenery for the price of a city apartment.”
Cheaper second-hand private houses can be found in the Haifa suburbs, known as the Krayot in Hebrew. Here a 150-square-meter property costs 2 million shekels on average, according to Yad2. However, says realtor Idan Alon, “That price reflects mainly two-family properties rather than single-family ones. Single-family homes start at 2.5 million shekels.”
A solution in the basement
Despite the opportunities for buying a reasonably-priced villa in peripheral or rural parts of the country, most of the demand for single-family homes is still in larger cities, despite the cost. According to the Yad2 survey, Rishon Letzion topped the list, followed by Tel Aviv, Be’er Sheva, Herzliya, Petah Tikva, Haifa, Ashkelon, Rehovot and Jerusalem. In most cities, detached homes have become significantly more expensive. In Petah Tikva and Rehovot, the average price for a detached home is 3.7 million shekels. In Jerusalem and Rishon Letzion it’s 4.2 million shekels, while in Tel Aviv and Herzliya these homes cost 6.5 million shekels on average.
“Most of the people looking for detached homes in Rishon Letzion are families with two or three children, people upgrading their homes who are leaving apartments they own in city centers, trying to improve their quality of life. In recent years there has also been a growing interest among young couples, but the numbers are still small,” says Sivan Cons, who heads the Anglo-Saxon real estate chain’s branch in the city.
“In the eastern part of the city these are usually detached homes on 250-square-meter plots, with average prices ranging between 3 million and 3.5 million shekels. In the western part of the city, which is considered a classier area, the plots are a similar size and most of them include a swimming pool. Prices begin at 3.8 million to 4.5 million shekels. For newer houses in this area, such as in Neve Dekalim, the average price is much higher, reaching 6 million to 6.5 million shekels for larger plots.”
In order to fulfill the dream of owning a detached single-family home without leaving the more expensive central region, young couples look for creative solutions. Many seek to split the property and rent out the basement as a separate unit, a lucrative move that can cover part of their mortgage payments. This method, which often is illegal and also frequently involves dodging taxes, is not new, but realtors say it’s a method that’s gathering steam. “Creating living spaces in basements has become common and is considered an acceptable solution for most young couples buying single-family homes in recent years. This is one of the first criteria they look for when searching for a place to live,” says Cons. “In Rishon Letzion, I believe at least 90% of detached homes have units like that, most of them built illegally, without a permit. Only recently has the municipality shown an interest in this issue and it is now trying to legalize these units.”
“For a young couple paying a mortgage on a property worth 4 million to 4.5 million shekels, this could provide substantial income,” she adds.
“Most houses have two such units in the basement, each one usually 40-45 square meters. This includes one room, a living area, a kitchen, a shower and a bathroom. On average, such units can be rented out for 3,500 shekels a month. Renters are usually bachelors, young couples without children or students.”
A similar trend is evident in Herzliya as well. “When a young couple seeks to buy a detached home on a limited budget, the ability to generate income through a basement unit helps them bridge pricing gaps and take extra financing,” says Nuri Yosef, Anglo-Saxon’s franchisee in Herzliya. “These units are mainly rented to students and young singles, with rental prices ranging on average between 3,500 and 5,000 shekels a month.”
A dream that crosses boundaries
The search for affordable detached homes and quality of life sometimes involves stretching the definition of what makes up Israel’s periphery. “For many people, Judea and Samaria (in the West Bank) are a proximate periphery. Some of the communities in these areas are only 10 minutes away by car from nearby city centers,” says Dror Ohev-Zion, owner and director of a real estate marketing company called Dara Project Marketing, which operates in these areas. “Most of the demand for housing in Judea and Samaria over the last decade has been for places that are close to the old Green Line, such as in Nili, next to the city of Modi’in, or in Nokdim and Efrat, which are close to Jerusalem, or Peduel and Alei Zahav, near Petah Tikva and Rosh Ha’ayin. Communities close to the 1967 border enable young families to buy a detached home with a garden for the price of a small apartment in adjacent cities.”
According to Ohev-Zion, the average price for new homes in these areas ranges from 1.8 million to 2.5 million shekels. In Nokdim, one can find a 165-square-meter house for 1.9 million shekels. In Nili, where prices are a bit higher, a 140-square-meter two-family home sells for 2.15 million shekels.
Adi and Elad Lovitz, who moved to the settlement of Nokdim last summer, recount the real estate opportunities they found in the West Bank, and describe their choice to live on the other side of the 1967 border. “Living beyond the Green Line was never something we were looking for, but we weren’t deterred by the prospect. After living for seven years in Jerusalem, in the Katamonim neighborhood, we looked for a place to settle down. We looked for a community-based settlement with a mixed population, where we’d feel comfortable, at a price we could afford. We found it in Nokdim, 15 minutes from the center of Jerusalem. We bought it on paper, five rooms and a yard, for 1.7 million shekels. Until construction is finished, we’re renting here.”
The rise of the kibbutzim
Kibbutzim seeking renewal and development have been opening their gates to new people attracted by their community-based way of life, in addition to the draw of living in a private home with a yard at an attractive price.
“We joined the kibbutz two years ago,” says Ron, 37, a former resident of the Haifa suburbs and now a member of Kibbutz Neot Mordechai in the Upper Galilee. “We were accepted by the kibbutz after a lengthy selection process that lasted more than a year, in the course of which we already moved here. It included meetings to get to know one another, an economic and social background check and a vote by kibbutz members. Finally, we had to pay 130,000 shekels per couple as a joining fee. This is considerably lower than other kibbutzim. It depends on the assets each kibbutz owns.” Many kibbutzim have adopted this process, including examining new members’ financial resources, personalities and compatibility with kibbutz life. The process also involves lengthy information sessions and helping newcomers settle in.
“After we joined,” continues Ron, “we received a 800-square-meter plot in the kibbutz’s expansion zone, without having to bid on it or pay for the land. Aside from construction costs, including permits and taxes, we only had to pay for the plot’s infrastructure, which cost some 220,000-250,000 shekels.” Half a year ago, Ron and his family moved into their new house, which has nine rooms and a large yard. They declined to say what it cost, but said the price of construction per square meter was around 6,500 to 7,500 shekels, consistent with high construction standards.
Ron sees the purchase not as a real estate investment, but as a result of a much more profound choice. “For anyone looking for a real estate investment – this is not the place. Joining a kibbutz means making a commitment and a statement. It’s like marrying the local community, becoming a partner to anything going on here,” he says.
Most of the new construction in kibbutzim is focused on residential neighborhoods that have sprung up alongside them, called expansions. In most cases, the deal includes joining the kibbutz as members. The homes’ new owners pay only for construction costs. They don’t purchase the land, which remains under the ownership of the state or the kibbutz, as was the case with Ron and his family.
“People who join kibbutz expansions can be divided into three types,” says architect Avi Sternfeld, an expert on rural construction. “The first and main group is the children of veteran kibbutz members. Then there are people from within the kibbutz who are upgrading their living conditions. The third group is couples coming from outside the kibbutz. Most are professionals who have had enough of city life and are willing and able to change their way of life and adopt a kibbutz lifestyle.”
Sternfeld says kibbutz housing is inexpensive due to the low cost of this type of construction, not only because you don’t have to pay for the land. “The only costs incurred by buyers are construction costs, and 250,000 shekels for develpment outside the home. Usually, these houses are 160-180 square meters, costing 5,500 shekels per square meter. This means that such a property costs between 900,000 and 1 million shekels. In the city, construction costs are higher, often reaching 10,000 shekels per square meter or more. The reason is that on the kibbutz we’re very attuned to costs, and use a level of finishing with predefined standards. Usually, these houses are very easy to build, with few factors to increase the costs. Most of the people buying them are young, second-generation kibbutzniks who don’t have enough money for an expensive property yet. There is also some wariness about building neighborhoods of nouveau riche.”
End of the villa era?
It appears that the dream of a single-family home with a yard in Israel is slipping away. Amid forecasts of population increases over the coming decades, and the urgent need to increase Israel’s home supply, the trend in Israel is to use land more efficiently and increase density.
This has already had an impact on the market for detached homes. According to the Central Bureau of Statistics, in 2020 new construction of single-family homes plummeted to 5,500 units, a 45% drop from 2019 and a 10-year low. This comes after 12,500 new detached houses were built annually in the previous decade.
“The trend is not to approve construction of detached homes unless there is a truly vital reason for doing so, but it hasn’t been completely halted,” says Shahar Solar, the deputy director general for strategic planning at the Planning Administration. “Ultimately, there are rural communities where we don’t have an interest in harming their development or not allowing them to have a quality of life that suits their location. Given that, we don’t believe that this type of construction should be prevalent in Israel, and it should be limited as much as possible.
“Even when it comes to rural communities, by the way, the question arises as to whether they need to stay rural even decades from now, but we’re not in a place to decide that right now. That aside, most of the single-family homes being built right now are the product of old planning. I do believe we’ll see a significant drop over the next few years.”
“As a matter of principle, the Planning Administration’s policy is clear, as expressed by our strategic planning goals, which call for making more efficient use of land resources,” he adds. “Israel’s population is growing steadily and land supply is limited. In order to meet the needs of future generations we simply have no other choice. Our planning goals currently include increasing density, creating mixed use areas, building upwards where needed and creating more intensive and accessible environments, which will reduce the use of private cars. Obviously, detached homes don’t meet these needs. This is a type of construction that does not enable the mixed use that we’re talking about in an urban setting. It usually requires using private vehicles since the distances are greater, and requires more infrastructure, as well as more area. The increased usage of private vehicles leads to road congestion, which wastes time, pollutes the air and leads to lost work hours. We all pay the cost.”