Are you considering investing in real estate? With the help of Madeleine, we have selected 10 neighborhoods with cheap apartments and a handsome yield.
Western Kiryat Haim. Old train buildings
Photo:
Or Ling, Wikipedia
Produced by the Department of Special Supplements
About two weeks ago, something fell in the Knesset: Among the many sections of the Economic Plan for the War in Corona Law, a section proposed by Finance Minister Israel Katz was also approved, with good news for investors: the purchase tax on a second apartment, which stands at 8% since 2015 .
The increase in the purchase tax in 2015 was supposed to address the housing protest that erupted in 2011. The then Minister of Finance, Moshe Kahlon, hoped that raising the tax would reduce the viability of investing in real estate in Israel for those who do not have their first apartment. Following the Corona crisis, it was decided to reduce the purchase tax and try to bring investors back to market.
Investment in real estate is considered relatively solid for the stock market, for example. The real estate market is less volatile and works for longer periods. It is less affected by current events, and in Israel, where there is a real shortage of apartments, it is easy to believe that it will continue to climb.
Anyone who has seen his money erased on the stock exchange in the first wave of the corona (although it has since risen again) and pulled it during or after the declines, may now be looking for an alternative investment channel, one that will not put his nerves to the test. Such a person may turn to the real estate market, and this is exactly what the Ministry of Finance is building on.
Residence versus investment
Buying an apartment for investment is different in many ways from buying a residential apartment. Many criteria that worry buyers of residential apartments, such as the quality of the schools in the area and the socio-economic rating of the neighbors, bother investors much less.
In fact, when buying an apartment for investment there are two criteria that determine whether the deal is good or not: the rental yield, which is derived from the rent that can be obtained, and the capital return, which results from the future increase in value of the apartment.
The rental yield is calculated by dividing the total annual income from the apartment by the total expenses for it (which are basically the price of the apartment, but if there are additional expenses - such as interest on a mortgage or renovation expenses, they must also be taken into account).
Thus, investors generally like relatively small and cheap apartments, the rents on which are reasonable, so that in the end the return will be relatively high. Such apartments can be found mainly in the periphery. A second-hand three-room apartment in Nahariya will usually give a better return than a new three-room apartment in North Tel Aviv, unless it was purchased at a particularly low price.
Neve Ofer. Attracting young families // Photo: Uri, Wikipedia
What did we check?
With the help of Madeleine's analysts, we scanned the country for neighborhoods worth looking for investment opportunities, due to a combination of relatively low prices for the environment and the city and decent rent.
Tal Kopel, Madeleine's deputy CEO, notes that an important parameter taken into account is the demand for apartments in the neighborhood. In an apartment for investment enough that a few months do not find a tenant, and the yield erodes to a thin. A successful apartment for investment is a combination of a low price and an environment that people can and want to live in. "
Kopel emphasizes that neighborhoods have been selected in the vicinity of which there are plans for the future that are expected to change the face of the neighborhood, and they may increase the value of the apartments significantly.
Old Motzkin, Kiryat Motzkin
The old neighborhood in Kiryat Motzkin mainly includes low-rise or ground-level construction. It is close to commercial centers, it has gardens, and within walking distance of it is a station of the Israel Railways, which will take you to the employment centers in Haifa. Most of the buildings in the neighborhood are old, but some have already passed or are in the process of TMA 38. It is possible that in the future there will be quite a few evacuation-construction plans in the neighborhood, which will increase the value of the apartments.
Price of a second-hand 3-room apartment: NIS 800,000.
Rental yield: 3.75%.
Kiryat Eliezer, Haifa
Kiryat Eliezer is located in northern Haifa, near the Bat Galim neighborhood and the beach. The neighborhood currently has low construction, mostly of old and slightly neglected railway buildings. The municipality plans to upgrade the entire neighborhood through a variety of urban renewal projects, both as part of evacuation-construction and as part of NAP 38. Some of these projects have already been implemented, or are in advanced planning.
Price of a second-hand 3-room apartment: NIS 780,000.
Rental yield: 3.7%.
Western Kiryat Haim, Haifa
The neighborhood consists of a variety of relatively neglected housing estates and plots, only with a twist: they are right on the sea. The problem is that they are also adjacent to the gas tank farm, a polluting plant whose impact on the environment is extremely negative, and not far from the refineries. If these two are indeed evacuated, as the morning news promises to the public, it is likely that there will be massive new construction in the neighborhood as part of urban renewal, and its prices will skyrocket.
Price of a second-hand 3-room apartment: NIS 720,000.
Rental yield: 4.2%.
Neighborhood D, Beer Sheva
True, for years the neighborhood has not been the paradise for investors it once was, but it still gives one of the highest and safest returns in the housing market. The neighborhood is known as the student neighborhood of Ben Gurion University of the Negev. Although (or because) the neighborhood attracts investors and a young population, the buildings in it are still old and neglected, as is the public space (although the Be'er Sheva municipality is trying to change the situation). It is important to emphasize that the neighborhood is large, and you should consider the distance of the apartment from the university when it comes to choosing a property.
Price of a second-hand 3-room apartment: NIS 650,000.
Rental yield: 3.8%.
Neighborhood D. Not heaven // Photo: Edau, Wikipedia
Veterans Housing, Bat Yam
An old neighborhood in the heart of the city with low-rise and ground-level construction. The location is central and close to good public transportation (including the red line of the light rail), to malls, cultural institutions, many gardens and parks and most importantly - to Tel Aviv. The ground-level area in the north of the neighborhood is expected to maintain its character, but the low-rise construction in the rest of the neighborhood has the potential for urban renewal and value improvement, especially in light of its central location and proximity to the light rail. In the more distant future there may also be a metro station nearby.
Price of a second-hand 3-room apartment: NIS 1,360,000.
Rental yield: 3.5%.
Neve Ofer, Tel Aviv
Years of neglect have brought the Neve Ofer neighborhood in south Tel Aviv to a poor state, but the sharp rise in apartment prices in Tel Aviv has begun to attract more and more young families of relatively high social status to the neighborhood in recent years. Construction plans around it and within make the neighborhood attractive: Abu Kabir Detention Center is due to be vacated, evacuation-construction plans for old buildings are taking shape, a new middle school and high school have begun operating in the neighborhood, and recently a bike path has been paved next to it, shortening travel time to downtown -12 minutes only.
Price of a second-hand 3-room apartment: NIS 1,450,000.
Rental yield: 3.5%.
Shachmon district, Eilat
Shachmon is considered the most prestigious district in Eilat. The neighborhood consists of villas with a pool, two-family, luxury buildings and low-rise buildings, with the main tenants being wealthy residents of Eilat, who are interested in a spacious and pleasant environment with lots of open green areas. The neighborhood is also an attraction for Airbnb tourists, with Israelis replacing foreign tourists during Corona.
Price of a second-hand 3-room apartment: NIS 1,100,000.
Rental yield: 4%.
District B, Ashdod
The northern district B is a total of one kilometer from the coast, and is already undergoing an accelerated process of renewal. More than 20 buildings in the district are under construction or advanced planning of NAP 38, and several projects have already been completed. The entire city is in a development boom: alongside plans to promote employment and open Assuta Hospital, there is also a public transportation project that has made the train station more accessible.
Price of a second-hand 3-room apartment: NIS 1,000,000.
Rental yield: 3.85%.
Downtown, Afula
In the last decade, there has been a considerable amount of new construction in the center of Afula, and not just for housing: construction of a central station and modern shopping center in place of the old and neglected station, alongside the construction of the railway park. In recent years, a new urban park, a train station and a large, new residential neighborhood have been established in Afula, attracting young families to the city.
Price of a second-hand 3-room apartment: NIS 550,000.
Rental yield: 4%.
Olga Hill, Hadera
The fact that Olga Hill is expected to undergo a massive facelift in the next decade, in which the old and neglected housing estates and detached houses will be evacuated in favor of new buildings and towers for residences and offices, is already an open secret. Although the plan does not cover the entire area of the neighborhood, the trend it marks for the area is clear. Today the rent in the neighborhood is not in the sky, but the return on capital may be large.
Price of a second-hand 3-room apartment: NIS 920,000.
Rental yield: 2.95%.
Produced by the Department of Special Supplements