Buy-It In Israel

Rental prices rise 15.3% as more buyers purchase property in Israel for investment

Posted on 07. Jan, 2010 by Buy-It In Israel Staff in Israel Real Estate

© iStockphoto.com/Amit Erez

For years, Israel has been ranked as one of the countries with the highest percentage of apartment owners in the western world. However, in the last 15 years the percentage of home owners in the Israel real estate market has been declining gradually as more and more households are renting rather than buying.

The percentage of home ownership in Israel has come down from 73% in 1995, to 70.7% in 2007, to 68.8% in 2008. The shift in the demand to purchase a home in Israel has contributed to a rise in rental prices in most areas of the country, in particular in the Tel Aviv real estate market, while the supply of rental apartments has also been on the increase.

In 2009, the prices for renting apartments in Israel rose by an average of 15.3%. In the first nine months of 2009, the national average price for apartment rentals in Israel stood at NIS 2,700 a month. Apartment rentals in Tel Aviv were the highest Israel real estate market charging an average of NIS 3,760 a month, which is 39% more than the national average, and were the lowest in the Haifa area with NIS 1,640 a month. In the Jerusalem real estate market, apartments were rented at an average price of NIS 3,210 in the first nine months of last year compared with NIS 2,704 in 2008.

© Tal Cohen

A recent report published by Israel’s Ministry of Construction and Housing shows that one of the main reasons for the rise in rental prices for property in Israel is attributed to strong demand for the purchase of apartments for investment purposes.  Since 2002, there is a growing trend in the Israeli real estate market to purchase property in Israel for the purpose of investment. One of the main reasons for this change has been tiggered by falling interest rates and a shortage of investment opportunities.

The trend reflects a shift of money away from traditional investments into more uncertain capital market and financial instruments. This shift has accelerated more recently as a result of the global financial crisis and the search for alternative investment opportunities such as rental property in Israel which has become a more secure investment. The global economic crisis has also hit the Israeli economy, although at a much lesser extent than other developed economies, while the local real estate market has not been affected. In the first half of 2009 about of third of all apartment purchases were for the purpose of investment compared with 22% in 2002. This is an opposite trend to that in the American and European economies, where real estate was booming for many years until the bubble burst and plummeted in the midst of the subprime mortgage crisis.

In the large cities such as Tel Aviv, apartment purchases for investment peaked to a high of 55% of all residential buys. In the periphery such as Haifa and Be’er Sheva, investment purchases exceeded a third of all apartment acquisitions during 2009.

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