Since 7 October, there has been an earthquake in the rental sector in Israel. reservists, evacuees or business owners who have been shut down are unable to pay rent; The contractual obligation on the lease remains, but on the other hand, reality dictates the change in the rules of the game. Many young people prefer to go back to live with their parents or bring in roommates; And all this against the background of the fact that the increase in home prices does not stop, even in these difficult times.
The need to evacuate tens of thousands of people has led to situations in which people cannot make use of the apartment they rent, or businesses located on rented land – in Ashkelon or Sderot for example – which is currently unused but paid for. On the other hand, many evicted families, who have internalized that they will be forced to be away from their homes for a long period of time, are looking for apartments to rent, and thus the demand is growing even more.
In the first stage, the Law for the Postponement of Dates provided a temporary solution of postponing payment dates for regular and permanent soldiers, reservists, members of the security forces, prison guards, residents of evacuated communities, and family members of abductees and missing persons. Currently, the Civil Law Department is working in consultation and legislation in cooperation with the Policy and Strategy Planning Division to promote additional solutions that will help apartment renters and landlords during this period.
The Justice Ministry is currently examining the regulation of rentals during the war, and among other things, is trying to answer questions such as whether the tenants should continue to pay the rent even though they are out of the property against their will, and what about the private landlord who finds himself in a situation in which he does not receive regular payments.
Before the war, home prices continued to decline, but for apartments in the sample where there was tenant turnover, there was an average increase of no less than 9.8% in monthly rents.
Kfar Saba on the Rise
Meanwhile, rental prices continue to rise. There was an increase of 3.6% in monthly rent for those who renewed their lease, and for new tenants (apartments in the sample where there was a tenant turnover) there was an increase of 8%. This is a slight increase after relative declines, with an increase of 9.8 percent in June, an increase of 9 percent in July, 8.4 percent in August, and 7.6 percent in September.
Once a quarter, the Central Bureau of Statistics publishes data on average rents in various districts and cities. An analysis carried out by SK Appraisal shows that the average rental price for an apartment in Israel in the third quarter of 2023 was NIS 4,519 – an increase of 6% compared to the third quarter of last year, and an increase of 2% compared to the second quarter of the year.
When examining rent by the number of rooms per apartment, it can be seen that the sharpest increase (7%) was in large apartments of 6.4-5 rooms, with the average rent of these apartments already reaching NIS 6,388 per month.
Looking for a solution for closed businesses. Kiryat Shmona, Photo: Eyal Margolin - Ginny
It was also found that the city with the sharpest increase was Kfar Saba, with an increase of 9% per year. In Jerusalem, Petah Tikva and Tel Aviv there were increases of 7%, while in Tel Aviv the average rent is the highest in the country and stands at NIS 6,764 on average. Herzliya is in second place in terms of average rent of NIS 6,274 per month, followed by Ramat Gan, with NIS 5,287. Regarding Tel Aviv, realtors in the city claim that since the beginning of the war, the number of rental apartments in Gush Dan and the center of the country has increased due to low response, which may later lead to a significant drop in prices.
Lowest average rent. Be'er Sheva, Photo: Dudu Greenspan
The lowest average rent was recorded in Beer Sheva and stands at NIS 2,843 – an increase of 4% compared to the same period last year. In Ashkelon, the rent is NIS 3,364 and in Hadera it is NIS 3,513 per month.
Demand will only increase
Real estate appraiser Shmulik Cohen, CEO and co-owner of SK Appraisals, notes that rental prices will continue to rise and the war will only accelerate the trend, with an additional increase in rental prices for apartments with a safe room in the near future.
"Market conditions that caused the increase in rental prices have only worsened – such as the halt in demand for home purchases as a result of rising interest rates – and now because of the war, demand for rental apartments is increasing and prices are rising. Young couples who live in rentals will continue to postpone purchasing an apartment in light of the uncertainty in the market. The decline in investor activity will also continue, causing a decline in the number of investment homes on the market.
Price increase, photo: courtesy of Real Estate System today
"After the war, I expect an acceleration in urban renewal projects for rent. This means the demolition of thousands of housing units for reconstruction, which reduces the supply of rental apartments and increases demand from apartment owners who vacate for the construction period, especially in cities where there is a high concentration of projects."
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