An 18% annual increase in housing prices: are small apartments the solution?

Against the background of breaking the all-time record in housing prices, we met the couples who are trying to solve the problem by purchasing small apartments.

They are faced with high prices and especially with poor infrastructure: "The apartments are very, very old and they push into the price the TMA that you might have in six or seven years"

Bini Ashkenazi

08/16/2022

Tuesday, August 16, 2022, 10:32 am Updated: 10:47 am

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Yoseftal neighborhood in Bat Yam.

Even there, 3-room apartments cost about NIS 2 million, when new projects are being built all around (Photo: Reuven Castro)

Apartment prices completed an annual increase of almost 18%, according to data published yesterday by the Central Bureau of Statistics.

The data shows that this is the highest price increase in a decade.

Damaged housing prices affect the buyers of the apartments as well as the renters of the apartments, the figures of the Central Bureau of Statistics show that the rent in the last month increased by 0.6%, this is due to the fact that 86% of the renters are still under an existing contract, so the index for them remains almost unchanged. However, for 10% of the tenants who renewed a contract, there was an increase of about 3.5%, while for 4% of the renters there was an increase of about 7%.

How does the increase affect the young couples who are looking to purchase an apartment? We spoke with three interviewees who are looking to purchase relatively small apartments, of up to 2-3 rooms.

Says: "I've been trying to buy a house for a long time and now I'm looking for a 2-3 room apartment. The problem is that the apartments offered on the market today are priced too high, they offer a two room apartment for the price of three rooms."

Arnon explains that he is looking in Jerusalem, but the apartments that are offered are: "Very, very old apartments that push into the price the TMA that you might have in six or seven years, apartments without infrastructure for the price of a new apartment if not more."

When diving into the data collected by madlan and which are published here for the first time, you can see that between the years 2006-2022 the average price for a two-room apartment in Jerusalem crossed the one million shekel mark. Similar data is also published by the CBS.

The average price for a three-room apartment in Jerusalem in those years approaches the threshold of a million and a half shekels.

The data collected by madlan confirm Arnon's words, as it can be seen that the prices of the small, 2-3 room apartments in the old neighborhoods in Jerusalem, most of which lack new infrastructure, also cross the million shekel mark.

Facing Tel Aviv.

Even a one and a half room apartment in a decent neighborhood in the city is hard to find for less than NIS 1.5 million.

Even in the south and east of the city, the "opening fee" for purchasing a small apartment is about NIS 2 million (Photo: Reuven Castro)

A three-room apartment for NIS 1.3 million

Barak from the central region has

given up on the Israeli dream of a four-room apartment, he is looking for a small apartment in Haifa: "I don't need a bigger, bigger apartment, and of course there are also budget limitations."

The reason he focuses on Haifa is the price, "I was looking in the central area. There is a project in Bat Yam of 2-3 room apartments that has not yet started construction, but the price starts at NIS 1.8 million, which is expensive for me. To be honest, Haifa is also dear to me, but in the lower city and the Hadar neighborhood But it's still cheaper than other places. I also think that Haifa is the next thing, the real estate there is at the point before it explodes.

" Around a little over half a million shekels, similar figures are also published by the CBS.

The average price for a three-room apartment in these years in Haifa is approaching the mark of nine hundred thousand shekels.

As in the case of Arnon, so also in the case of Barak, the data collected by madlan show that even in the old neighborhoods in Haifa, prices are rising.

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Tal Kopel, Madlan CEO (Photo: PR)

who invests

And there are also those who are looking for small apartments for investment, not for living, Lior of the North is one of those and he is looking to invest in Beer Sheva, "I am looking to invest in a developing area like Beer Sheva, I am targeting potential urban renewal projects. There is a serious shortage of small apartments with 2-3 rooms. Hardly anyone builds them. The government puts apartments on the market in an inverse ratio to demand. That's why the yield on them goes up."

Lior adds: "In Be'er Sheva there is a construction boom and the renewal of the old neighborhoods and it's only a matter of time until they will be demolished and built. Along with this, there is also good demand for houses at their current level."

When you dive into the data collected by madlan you can see that between the years 2006-2022 the average price for a two-room apartment in Be'er Sheva hovered around half a million shekels.

Similar figures are also published by the CBS. The average price for a three-room apartment in these years in Beer-Sheva approaches nine hundred thousand shekels.

These figures are not surprising, but they show that even those who are looking to escape the steep price increase in Israel are likely to encounter great difficulties that will be reflected in excessively high prices as well as a too low supply of small apartments.

: "Unlike in the past, when people of low socioeconomic status lived in small apartments, today we see a strong population at the top of the table of neighborhoods that do not have large apartments.

When it comes to young couples, even those who have the money will find it difficult to find a bigger apartment when they want to expand the family, and then they are forced to either compromise on living in a smaller apartment and give up the standard of a room for each child, or leave the neighborhoods and even move out of the big cities.

The low supply of large apartments also means that the difference between the prices of 3-room apartments and 4-room apartments can reach a million shekels, which makes it even more difficult to purchase a large apartment in the demand areas."

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Tags

• Housing shortage

• The price of the apartments

• housing prices