“Home prices always rise.” That’s the conventional wisdom of the average Israeli and for the past eight years it’s been a fact. But even in a market like this, some properties have generated better returns than others. Some neighborhoods around Israel have seen prices more than tripled over the past eight years — an average rise of 25% a year — while others have seen only low double-digit gains. TheMarker has looked at these neighborhoods in three of Israel’s largest cities, pinpointing where prices have risen the least (in percentage terms) since 2007 and where they have climbed the most. Overall, 10 cities have been surveyed by TheMarker and the Madlan real estate website.
As with every price survey of the Israeli housing market, this one shows the average changes in percentage terms, rather than in nominal shekel (or dollar) amounts. This method has a number of benefits, but it gives the advantage to neighborhoods where the starting prices in 2007 were especially low.
For example, in the more exclusive neighborhoods of north Tel Aviv a price increase of 300,000 shekels ($76,500) for an apartment might reflect a 10% to 15% rise; in a neighborhood in a town far from the center of the country this amount would have doubled the value of an apartment, if not more.
Hint of future trends
But TheMarker’s survey also shows neighborhoods where prices may rise faster in the future, or the opposite, where prices are likely to remain stagnant.
For example, TheMarker found that new construction almost always leads to accelerated price increases, including for existing homes. In almost every neighborhood that showed the most moderate price increases, there had been no new construction for years either in the neighborhood or nearby.
Another factor pushing prices higher was a high percentage of buyers purchasing homes as an investment. In neighborhoods where most purchases were made by people who planned to live in them, the turnover of properties was lower, which keeps prices down. Another factor tamping things down in certain neighborhoods was the local municipality’s failure to invest in parks, transportation and other infrastructure beyond the bare minimum.
To obtain the figures, Raveh Eytan, Madlan’s vice president of research and strategy, measured prices on all home sales reported to the Tax Authority in 2007 and from July 2014 through June 2015.
“Sales were divided up by neighborhoods, and within the neighborhoods into homogenous subgroups based on home types. In every subgroup that included a significant number of sales, we examined the change in prices,” he says.
“After that, we calculated the weighted average for the neighborhood, taking into account the number of sales in every subgroup. The municipal average was calculated using the weighted average for all the neighborhoods where the change in price was calculated, based on the appropriate weights.”
Jerusalem Ir Ganim Bet:
The steepest price rises in Jerusalem — some 131% over the past eight years, compared with an average of 79% for the entire city — were strangely enough in one of the poorest areas in the capital. At least that was the situation until a few years ago in Ir Ganim Bet, but in recent years middle-class families have moved in. The area suddenly became much more attractive after the development of the new neighborhood Givat Massuah got underway in 2010, says real estate assessor Yair Yadid.
Ir Ganim Bet is characterized by high-density apartment buildings, as opposed to neighboring Ir Ganim Aleph with its single-family homes. It’s divided into two sections — an older area of mostly three-room apartments and an area of new construction, though it amounts to only a few hundred units.