The 14 most desired cities in Israel: Jerusalem tops the list

Jerusalem is the top among most desired cities in Israel. Some 8,200 households are interested in buying an apartment in the city, according to data collected and analyzed by Israeli website Ynet and Geocartography research group, which examined the level of demand among apartment buyers in 14 large cities over the past year.

The analysis included cross-checking transactions that were carried out with telephone surveys among some 1,200 participants interested in purchasing an apartment in Israeli towns. Second place came to a considerable extent Tel Aviv with about 5,200 households wishing to buy an apartment in the city and came third with Haifa about 4,900 households.

Rina Dgani, an expert on economic feasibility and director of Geocartography, explains the gap between Tel Aviv and Jerusalem:
The population of the first Hebrew city (TLV) is about 450,000, half of the people, 900,000 living in the capital city, as well as the high prices that push many to seek an apartment outside Jerusalem.

A gap between demand and construction starts

The agreements signed in recent years in some cities are designed to ensure the rapid creation of tens of thousands of housing units in a way that will enable potential buyers to purchase an apartment in those places. But in practice, there is still a large gap between demand and the actual number of housing starts in all the leading cities.

Thus, for example, in Jerusalem began construction of about 2,000 apartments in 2016, a number that will answer about a quarter of the amount of demand in the city. Tel Aviv began building 2,600 housing units last year – half of the market demand levels and in Haifa, building starts with only 900 apartments – about one fifth of the needs.

Yaffa Sadan, vice president of marketing and sales for Yossi Avrahami, who is building the Turquoise project in western Haifa, said that “in the Haifa area, not enough housing is being constructed concerning the needs of the population in the area. The state relates to the increased marketing of new apartments, but in practice, the pace of housing starts does not change. There is no point in buying land in areas where there is no demand. Meanwhile, in places where the population wants to live, prices continue to rise. ”

In the cities adjacent to Tel Aviv – Rishon LeZion, Petach Tikva, and Holon, there is a significant gap between the demand and supply curve. In Rishon LeZion, 3,200 households are expected to live in Petah Tikva, compared with 900 housing starts; 3,100 households in Petah Tiqwa, compared to 1,400 construction starts; Holon has 2,900 families, compared to 1,100 dwellings whose construction began; and 4,100 households in Be’er Sheva, 2016.

Dgani notes that this problem is likely to be resolved following the roofing agreement to promote some 20,000 housing units in Be’er Sheva in the next decade, but added that additional areas of employment in the south should establish for these residents.

In other cities, gaps also found between the demand for building starts. In Ashdod, approximately 2,700 wanting to live in the city, compare to 600 housing starts;
In the densely populated Bnei Brak, 1,900 families expressed an interest in purchasing a house, compared to 600 construction starts;

In Rehovot about 1,900 families waiting, compared to about 900 housing starts;

In Modi’in an unusually large gap where 1,500 households are wanting to live in the city, compared to only 300 housing starts.

Cities with a high correlation between demand and supply are Netanya with about 1,900 households, compared with 1,600 housing starts and Beit Shemesh, with approximately 1,800 homes, compared with nearly 1,400 under construction. Dgani notes that despite the many differences between the cities, they share a proper planning that relates to transportation and employment.

“Netanya enjoys a large and successful employment area in IKEA and South Netanya, three train stations, (Netanya, Sapir and Beit Yehoshua) nearby, efficient and fast transportation routes and new and extensive construction in all parts of the city,” Dgani explains.

“Despite the great diversity, Ramat Beit Shemesh relies on relative proximity to Jerusalem, a train, a highway to Tel Aviv and the Dan region, and is relatively close to Highway 6.”

The gaps reflected in housing prices

The real estate appraiser and legal expert Nehama Bugin examined the prices of apartments in the leading cities for demand by analyzing the average price of a four-room apartment in each city. As expected, Tel Aviv leads the list with NIS 2.91 million ($800,000) for a four-room apartment. Ramat Gan is in second place with NIS 2.15 million ($590,000) for an average 4-room apartment and Jerusalem for the third time, with NIS 1.92 million ($530,000) for a four-room apartment.

Bogin notes that the level of demand versus the small supply explains why housing prices are high. “In cities such as Modi’in, Haifa and Ashdod, the supply to demand ratio is 1 to 5. Meaning one apartment is available for every five applicants, or one to four, as in Jerusalem and Rishon Letzion, beyond their real value, based on the fact that the national average is about one apartment for every three applicants,” she says.

At the same time, it demonstrates that the high gap between demand and supply in Modi’in led to the average price of a four-room apartment in the city reaching almost NIS 2 million ($552,0009) “It’s a high price by all means,” she says.

“Despite many plans for new apartments in Modi’in, the pace of planning and developing the land, delivery to the developers and the start of marketing is slow and insufficient. Relative to the level of demand, the result is an apartment price that is almost equivalent to an apartment in Ramat Gan. About 10% less than its current price. ”

On the other hand, Bogin demonstrates that in Netanya, where the rate of housing starts is 85% of the demand, there is no shortage of new apartments and the average price of the apartment is NIS 1.71 million ($472,000). “Without a doubt, this is a real price that is even lower than the average price in the central region.”

The greatest gaps between demand and supply of housing starts found in Ashdod and Haifa. “These are the big cities with small demand for housing units from the population living in the city and people that want to immigrate to them,” said Amos Dabush, VP Marketing of YH Dimri.

“Since these cities do not have land available for construction and project planning, the gaps between demand and supply will grow even more, and will cause prices to rise not only in these cities themselves but also in the surrounding communities because demand will spill over,” he added. “The more the Ministry of Finance increases and deepens the uncertainty in the real estate market, the greater the gaps will be seen, as many construction companies are freezing work on projects or waiting to see the situation clearly.”

JERUSALEM: Political pressures are stoking construction

In Jerusalem, which leads as stated in demand, a geometric survey showed that demand characterized all sectors, secular, national religious and ultra-Orthodox. In light of the tense situation in the city, there are reports of the abandonment of wealthy populations in favor of the cities of the Lowlands and the shortage of jobs, especially in the private sector.

Dgani notes that the main reason for the negative migration to the city was the number of small building starts compared to the massive demand. “If the government of Israel works in the next few years to significantly increase the supply of housing in the city through new projects and urban renewal, there will be high demand, and this fact will also reflect in the reversal of the trend and positive migration to the capital.”

Under the umbrella agreements for the city, the municipality promotes the construction of 28,000 new apartments. According to the Jerusalem District Planning and Building Committee, among the major building plans already approved for construction are 2,000 housing units in the Arnona neighborhood, 2,400 in Gilo and 1,531 in Ramat Shlomo.

Another central plan, which was deposited for objections, includes about 1,000 units in Pisgat Ze’ev. However, the implementation of many programs delayed due to political and environmental pressures that limit the direction in which the city can develop.

First, a large part of the building permits earmarked for neighborhoods beyond the Green Line, as in Gilo, and the political echelon delays their planning processes. At the same time, the CMO promotes large building reserves around Jerusalem, such as the Reches Lavan (White Ridge) program (which includes 4,500 new apartments) and Mitzpeh Naftuah – but environmental organizations opposed due to damage to these areas.

There are no plans for the occupant in the city, which is vigorously promoting the housing base under the Ministry of Finance, apart from a project in Ramat Shlomo that was intended for Haredim only. A price plan for the occupant that was supposed to be auctioned at Gilo fell due to political pressure.

On the other hand, according to the Moriah Development Corporation of Jerusalem, over the past three years, the city has begun many urban renewal processes, including construction projects. According to the company’s data, to date, more than 80 building permits have been issued for TAMA 38 projects throughout the city, 60 permits in the last three years.

As for the Urban Renewal, the scope of housing units planned in this framework jumped by 350% in three years, and from only eight projects in 2014 to 35 today. These are expected to add over 10,000 new units. Eight of the evacuation plans for construction are approved for validity and are supposed to add about 1,900 new homes.

Besides, four additional plans are being deposited with the District Committee and are expected to add about 1,200 apartments in Jerusalem, and about 23 projects with approximately 7,400 units are at an earlier stage of planning. With 4,461 apartments in Kiryat Hayovel. According to the company, there are about 102 potential evacuation projects in the city, which can add over 26,000 new apartments by 2040.

Doron Neuert, CEO of Moriah Development Corporation, says that hundreds of new apartments are expected to be built in the Urban Renewal in Gilo and Talpiot. Lots of activity in implementing plans for urban renewal in the city and empowerment of the old neighborhoods, to provide a suitable response to the high levels of demand in the capital city. ”

By Billy Frankel, Ynet (Hebrew)