Housing Inventory

Yair Assaf-Shapira

Planning is required if you want to build apartments. When there is a dearth of apartments, a question that arises is: Is there a lack of apartments today because the scope of the planning wasn't wide enough or because the construction process is too slow and can't keep up with the planning? This debate is at the core of the argument about the future of the Committee for Preferred Areas for Housing (CPAH). Following a government decision, the Planning Administration and the Israel Land Authority provide the public with a database which includes all the apartments that exist "on paper" and their various planning stages, via the website data.gov.il. This database is the residential planning inventory. We have tried to examine the scope of the Jerusalem apartments that are currently in the planning stages.

The planning inventory of all the apartments in Israel stands at 436,700 apartments, of which 8,900 (2%) are in Jerusalem. The cities with the largest planning inventories are not the big cities which comprise the nuclei of the metropolitan areas – in those areas they have "run out" of room to build – but rather mostly medium-size cities such as Ashkelon, where the number of planned apartments in the inventory stands at 27,800, Kiryat Ata (21,400), and Lod (15,900). The apartment inventories in Haifa and Tel Aviv are lower than that of Jerusalem, and number 6,500 and 3,900 respectively. With respect to the apartment inventory in Jerusalem, for 3,400 apartments (38%) the plans have already been approved, while the others are in earlier planning stages.

Will construction dwindle in the big cities once the apartments in the current inventory have been built? Not necessarily. The planning inventory included with this data does not take into account urban renewal or National Masterplan 38 (NMP38), which as we saw in this column, encompasses within its framework alone a further 3,550 potential new apartments in Jerusalem. It seems that urban renewal, or "compressing" the existing building situation is the principal option for housing development in the city.

Apart from that, a large portion of those who will live in the apartments yet to be built will come to the metropolitan centers for work, studies, leisure, etc. When examining the residential inventory according to metropolis, it emerges that most of the apartments in Israel's planning inventory (57% of the total number of apartments in the inventory) are located in the four metropolises. Thus it seems that the metropolitan centers are guaranteed a growing and developing hinterland, although while in metropolitan Tel Aviv there are 107,100 apartments in the inventory, in metropolitan Jerusalem there are only 27,800.  And furthermore, fewer than 60% of the apartments in the inventory in metropolitan Haifa and Jerusalem are in relatively advanced planning stages (with approval or lodging of objections), while more than 70% of the apartments in Tel Aviv and Beersheba are already in these advanced stages.

Translated by Gilah Kahn

Households

Yair Assaf-Shapira

At the end of 2016, some 2.5 million households lived in Israel. A household is defined as a group of people (or one person) who live in an apartment, and have a common expense budget for food. For example, a family can form a household, but flatmates who share the food budget will also be defined as such.

What is the number of persons in your household? The average HH size in Israel is 3.3 persons, but among the various population groups there is a difference in the sizes of HHs. For example, among the Jewish population, the average number of persons in a HH is 3.1, and among the Arab population it is 4.5. In Jerusalem, the average household size is 3.9, and among the Jewish population in the city it stands at 3.4.

The average, however, does not indicate the distribution. Households usually begin their lives small, as one or two people units, grow, and then split up and shrink, as a new cycle begins. A large part of a person’s life span is spent in a small household, and therefore a large proportion – almost half (43%) of the households are small, and include one or two people. Among the Jewish population in Israel, smaller households are more common (47%), and in Tel Aviv and Haifa they constitute the large majority (70% and 63% respectively) of the households. Among the Jewish population in Jerusalem, the share of small households is similar to that in Israel at 47%.

Among the Arab population in Israel, small households are much less common, and their share stands at 19%. In Jerusalem, the proportion of small households among the Arab population is only 15%.

Small HHs have different needs and consume different services, a notable example is apartment size. The share of small apartments (up to 3 rooms) in new construction in Israel is relatively small (9.5%), and according to the data, maybe it should be enlarged.

Housing Projects – Israeli Style

Dafna Shemer

One of the repercussions of the 2011 housing protests was that recent Israeli governments, and the current minister of finance in particular, have taken measures to lower the housing costs. For now it seems we’re still in trouble, though, given that the total number of monthly salary installments required to purchase an apartment in Israel (according to Ministry of Construction and Housing data for the first half of 2015) amounts to 146, whereas in 2009 the total was 116.

The project Mechir Lamishtaken (“Buyer’s Price”) was launched in an effort to address the growing housing crisis in Israel. Through this project developers compete for discounted land to construct affordable housing for first-time homebuyers who meet certain qualifications, and the apartments are then offered for sale by lottery. As of 2016, a total of 7,600 apartments were offered in tenders. In Jerusalem the total was 501, and tenders will soon be announced for 407 apartments. The (501) apartments offered so far amount to 18% of the annual average for construction starts in Jerusalem over the past five years. The apartments offered so far in the context of Mechir Lamishtaken were mainly in the neighborhood of Ramat Shlomo (86%), and the remainder in Pisgat Ze’ev. The average apartment size is 116 square meters (Sq m.), which exceeds the 2016 average for Jerusalem, at 81 Sq m.

The media has pointed out that apartments in the Mechir Lamishtaken program are generally larger than typical, and so too in Jerusalem: 40% of the apartments offered through the program have 5 rooms, and 35% have 4-4.5 rooms. According to data on construction starts in Jerusalem published by the Central Bureau of Statistics, only 20% of apartments under construction in Jerusalem in 2016 had 5 rooms.

The prices of apartments that have been won by lottery are published on the website of the Ministry of Housing and Construction, and as promised, their prices are lower than average for the relevant neighborhoods. An apartment in this project in Ramat Shlomo costs NIS 12,900 per Sq m. whereas the typical cost, according to the Madlan website, is NIS 19,700 per Sq m. – a difference of 54% per square meter.

In Pisgat Ze’ev the cost for apartments in this project is NIS 9,500 per Sq m., compared with the average cost of NIS 16,200 per Sq m. – a difference of 69% per square meter.

Mechir Lamishtaken reserves a number of places for “locals”: 38% of the lottery winners in Jerusalem are Jerusalem residents, 22% are from the Tel Aviv District, and another 20% are from the Central District. A relatively small proportion of winners are from the environs of Jerusalem: 4% from the Jerusalem District (excluding the city) and 8% from the Judea and Samaria District.

The next tenders are expected to be announced in Gilo and Malha, thus maintaining the trend of using available peripheral lands in implementation of the project. The attractive price and “brand newness” of the apartments are plusses, but the locations are less attractive in terms of public transportation and, as a result, access to places of employment.

Translation: Merav Datan

Under Construction

Yair Assaf-Shapira
Jerusalem Institute for Policy Research en.jerusaleminstitute.org.il

During 2015-2016 (January 2015 through June 2016, a total of 18 months) construction was started on 70,600 housing units in Israel (provisional data, new buildings only).

The scope of construction in a particular region or locality reflects a number of factors: policy considerations, such as an interest in directing home-buyers or renters to a certain area; means of development, such as approved building plans; and a demand for housing in that region or locality. It is difficult to separate these factors, but the bottom line is that extensive residential construction will likely contribute to demographic change: more residents will be able to remain in or move to the locality.

The cities that saw the most construction were Jerusalem (3,700 construction starts), Tel Aviv (3,300), Netanya (2,300), and Petah Tikva (2,200). These four cities, however, have large populations, and it is not certain that the additional construction will have a strong impact on the population size. So where is construction likely to have a significant impact in relation to population size?

During 2015 (January 2015 through June 2016), for every 1,000 residents of Israel, construction was started on 8.4 housing units. The major cities, which need large numbers of housing units in order to accommodate population growth, were unable to reach this figure. In Jerusalem 4.3 units were started for every 1,000 residents, and in cities with a population between 200,000 and 500,000 (Tel Aviv-Yafo, Haifa, Rishon LeZion, and Petah Tikva) 6.6 units were started. The figures were higher for cities with a population between 100,000 and 200,000 (such as Netanya, Be’er Sheva, and Holon), at 9.2, and for cities with a population between 50,000 and 100,000 (such as Kfar Saba, Herzliya, Hadera, and Modi’in), where construction was started on 8.7 units for every 1,000 residents.

Smaller localities saw even more new construction of housing units in relation to their population size. For example, in localities with a population between 10,000 and 20,000 (such as Tirat Karmel, Ariel, Hura, Tel Sheva, and Kafar Manda), 12.1 units were started, and in rural localities (moshavim, kibbutzim, and the like), 11.4 units were started for every 1,000 persons.

The population growth correlated with construction trends: in cities with a population above 200,000 it was below average, and in the smaller localities it was higher. The sharpest increase in population during 2015 was recorded in rural localities, at 2.9%. Jerusalem, by comparison, had a population growth of 1.9%. It should be noted that population growth depends on a number of factors, not only on construction.

Translation: Merav Datan

How Much Do Jerusalem Residents Pay to Live near the City Center?

Ruth Abraham

In late November the Central Bureau of Statistics published data about the completion and commencement of construction during the first nine months of 2014. The data reveal that the number of housing units completed in Jerusalem is the largest in Israel, constituting 6% of all completed construction in the country. Likewise, Jerusalem is also in first place in terms of housing units begun, constituting 9% of new construction. It is important to note that the population of Jerusalem comprises about 10% of the overall population of Israel.

The “Madlan” index of housing prices provides an indication of typical prices at which apartments are sold. The index is based on business transactions listed in the real estate database of the Tax Authority after being optimized and sorted. The index reveals that housing prices in Jerusalem (for the months examined – April to September 2014) are among the most expensive in Israel. The price per square meter in Jerusalem is 40% higher than in Haifa, 57% higher than in Be’er Sheva, and about 20% higher than in Rishon LeZion. However, it is lower by 45% than the price in Tel Aviv.

The selection of a place of residence and the purchase of an apartment often depend very much on the distance from the city’s main business center. Some prefer a place far from the center in order to benefit from the option of a larger home with a garden or a view, whereas others insist on an urban lifestyle and prefer to be near the center. These decisions have a bearing on key aspects of our lives, such as transportation, service consumption, trade, and the like.

Evidently, in Jerusalem there is a positive correlation between proximity to the city center and housing prices. The closer one is to the center, the higher the housing prices per the index. This trend indicates that the average home buyer in Jerusalem is prepared to part with 35,331 shekels in order to be one kilometer closer to the city center. Accordingly, we see that in neighborhoods associated with a high socio-economic status – such as Mishkenot HaLeum, Rehavia, Talbieh, Nayot, Beit HaKerem, and Old Katamon – the prices are higher than in neighborhoods of a comparable socio-economic status that are located farther away from the city center – such as Ramat Sharet, Talpiot, Arnona, and Holyland.

Jerusalem neighborhoods may be divided into ultra-orthodox and secular neighborhoods. The price trend which characterizes ultra-orthodox neighborhoods is the opposite of the one described above. As the distance from the center increases, the housing prices in these neighborhoods rise. This trend is in part due to the larger apartments in the outer neighborhoods.

Sources of data:

Madlan website: www.madlan.co.il

Construction in Israel, Central Bureau of Statistics

Fair Rent

Yair Assaf-Shapira

Jerusalem Institute for Israel Studies

On November 24, the memorandum of the law for fair rent was published. The law states that the rent paid for an apartment will not increase by more than 2% per year, for three years. How different is the proposed situation from the prevailing one?

The average monthly rent paid for a 3.5 to 4 room apartment in Jerusalem stood at NIS 4,480 in the second quarter of 2014. This amount was much lower than the average paid in Tel Aviv (NIS 6,420), and much higher than the average paid in Haifa (NIS 3,010). The rent for these apartments in Jerusalem saw an average rise of 5.5% in the last year (since the second quarter of 2013 – during a period of four quarters), similar to Haifa (5.5%) and Tel Aviv (5.4%).

Compared to the proposed maximum stated in the law (2% annually), the rise seems to be steep. Compared to the cost of living, measured in the consumer price index, it is even more extreme, since the index rose only by 1% during the period. That means that the average rent rose by more than twice the proposed maximum, and more than five times the rise in the other components of the consumer price index.

Rent prices of smaller apartments in Jerusalem rose by lower percentages (1.3% rise and 4.3% rise in 1.5-2 room and 2.5-3 room apartments, respectively). Rent for larger apartments, sized 4.5-5 rooms, rose more dramatically, by 6.1%.

Will the proposed law change the balance between real estate rent and sell markets? Average purchasing prices for 4 room apartments in Jerusalem stood in the second quarter of 2014 at NIS 1,925,000. These prices rose during the previous year (from the second quarter of 2013) by 9.5% - a very steep rise. Will the prices' change rates be affected by the new law? Only time will tell.

Data sources: Ministry of Construction and Housing – Division of Economic Analysis: Data Tables

www.gov.il – Israel Government Portal

Home Owner

Yair Assaf-Shapira

Jerusalem Institute for Israel Studies www.jiis.org

29 percent of people aged 20 and above in Jerusalem, reside in an apartment they are renting. The rest reside in an apartment they own (60%), or use other arrangements (11%), including an apartment owned by a family member or a friend. This is revealed by the Central Bureau of Statistics' social survey, for the years 2012-2013 (years were averaged to minimize inaccuracy).

The percentage of renters in Jerusalem equals the one in Haifa (29%), and is low compared to Tel Aviv (42%). Interesting to note is the percentage being equal to that in Haifa, since Jerusalem is home to a very large population characterized by a traditional way of life, and we could have expected a lower percentage of renters.

Most of these renters do not own an apartment, but a considerable share does. 16 percent of Jerusalemites residing in a rented apartment (15% in Tel Aviv and only 10% in Haifa) own a different apartment, possibly renting it to others. As a result, the total percentage of home owners in Jerusalem is higher than the 60 percent residing in their own place, and stands at 66 percent in Jerusalem, 61 percent in Tel Aviv, and 71 percent in Haifa.

Of course the people residing in their own apartment sometimes own another one as well. This describes 12 percent of the people that live in their own apartment in Jerusalem, 15 percent in Haifa, and 22 percent in Tel Aviv.

Naturally, the rate of home ownership rises with age. Among young people aged 20-34 in Jerusalem, this rate stands at 55% - slightly higher than in Haifa (at 52%) and considerably higher than in Tel Aviv (at 39%). This percentage rises continuously with age in the three large cities, but in Jerusalem it rises slower, and comes to 79 percent at the age group of 65 and above – equal to the percentage in Haifa (at 79%), but lower than in Tel Aviv (at 86%). The change of the trend between the cities in the older ages may be connected to the difficulty of buying an apartment in Jerusalem, even for the people who are older today, meaning that the difficulty has been prevailing for years. But considering the high apartment prices in Tel Aviv, we can assume that it probably also stems in part from the phenomenon of young people leaving Tel Aviv, having failed to purchase an apartment there.

Data source: Social Survey, the Central Bureau of Statistics

Apartment prices in Israel

Yair Assaf-Shapira

The average price of a four room apartment in Israel is NIS 1.18 Million for a 2nd hand apartment, and NIS 1.26 M for a new one. Data refer to the second quartile of 2013 (April to June), and were compared with the second quartile of 2012. While prices of used four room apartments showed a small descent (-0.6%) over the year, prices of new apartments rose by 1.9%.

The prices represent a combination of supply and demand, which differ from city to city, and between areas in the country. In Jerusalem the prices of used and new apartments are higher (NIS 1.69 M and NIS 1.93 M respectively), and the price trends are opposite than the national ones. The used apartments' price in Jerusalem rose slightly (by 0.4%) compared to the second quartile of 2012, while the new apartments lost 3.6% of their price. Interesting to note that in Tel Aviv the prices of used four room apartments lost 12%, while in the ultra orthodox cities of Modiin Illit and Betar Illit near Jerusalem, they rose by 10%-11%.

Looking at the three room apartments (only used apartments on this market), one can observe that in most localities their prices are on the rise. In Jerusalem they rose by 3.1% during the year (compared to 0.4% in the four room apartments). Dramatic rises were recorded in Bet Shemesh (13%) and Modiin Illit (12%), as well as in various other localities. On average the prices of these apartments rose by 2.6% (compared to -0.6% in the four room market). While no three room apartments are being constructed (mainly because the profit for the entrepreneur is lower on them), it looks like the demand for them is large.

Data source: ministry of construction and housing, department of information and economic analysis

Buying apartments in Israel: who, where, and how much?

Yair Assaf-Shapira

Data released recently by the Ministry of Finance and the Ministry for Construction and housing, show that in Israel, apartment purchases by foreign residents summed up to 2.8% of all apartment purchases during the period June 2012 to February 2013. Other populations purchasing apartments were "residence improvers", buying an apartment which is not their first, but selling their previous one (37%); first apartment buyers (36%); real estate investors (21%); and others (2%).

But in some localities, foreign residents' purchases proportion was much higher than the national average. The top destinations in Israel for foreign residents seeking apartment purchases were Tel-Aviv, where they were responsible for 7.6% of the purchases, Netanya (7.8%), and, much higher, Jerusalem (12.8%). Noticeable in Jerusalem's vicinity was Bet-Shemesh, where 6.1% of the purchases were made by foreign residents.

Data allows us to drill down and look at neighborhoods within the city. Neighborhoods in Jerusalem that saw extensive purchase activity for 2nd hand apartments were Rechavia (38% of the purchases), Sanhedria (26%) and Romema (23%). For 1st hand apartments it was Sanhedria (77%), Romama (56%), and Bayit Vagan (53%). 

It has been said that foreign residents purchases raise the prices, and indeed according to the data it appears that foreign residents do not usually buy cheap apartments. On average, they paid 1.99 million shekels for an apartment in Israel, compared to 1.35 paid by residence improvers, 1.11 by investors, and 1.02 by first apartment buyers - almost half the sum paid by foreign residents. The prices paid by foreign residents in Jerusalem were higher, and stood at an average of 2.44 million, second in Israel to Zikhron Ya'akov (2.49) and Tel-Aviv, where they paid 3.23 million per apartment. Other populations who purchased an apartment in Jerusalem also paid more than the national average, but not extremely higher.

Data sources:

· Ministry of Construction and Housing, Department of Information and Economic Analysis

· Ministry of Finance, State Revenue Division

The High Cost of Housing

Eitan Bluer 

One of the most significant expenditures per household in Israel’s major cities is the expense of housing. The average Jerusalem household spent about NIS 3,650 monthly on housing in 2011; this amount constituted about 28% of all household expenses. The percentage of expenditures that went towards housing in Jerusalem was higher than the average for Israel (where 25% of total household expenditures was spent on housing) and Haifa (22%), but lower than the figure for Tel Aviv (31%). In recent years there has been a steady increase in household expenditures for housing. In the last five years, housing costs for Jerusalem households increased by 44%, from an average cost of NIS 2,537 per month in 2006 to NIS 3,648 per month in 2011. The rate of increase in Jerusalem (44%) was lower than the figure for Israel – where housing expenditures rose by 47% during the same period – and higher than the figure for Tel Aviv (41%) and Haifa (36%). 

The supply of apartments, as well as their size and number of rooms, also affects the expense of housing for renters. In 2011 the average monthly expense for renting an apartment in Jerusalem was NIS 2,613 for a 2.9-room apartment. That is, the average cost per room was NIS 901 per month. This price is higher than the average for Israel (NIS 837 per room), Haifa (NIS 626), and Be’er Sheva (NIS 380) but lower than the figure for Tel Aviv (NIS 1,420), Ramat Gan (NIS 1,120), and Rishon LeZion (NIS 985). 

An examination of the average cost per room as valued for homeowners’ apartments reveals the discrepancy in pricing between cities in the center of the country and in the periphery. The average value of an apartment in Jerusalem for the homeowner in 2011 was NIS 1,727,000 for an apartment with an average of 3.9 rooms (NIS 442,820 per room). The cost per average room in Jerusalem was higher than the figure for Israel (NIS 345,365 per room), Haifa (NIS 293,846), Be’er Sheva (NIS 205,609), and Rishon LeZion (NIS 379, 047), yet lower than the figure for Ramat Gan (NIS 532,571) and Tel Aviv (NIS 647,297). 

Source: Press Release for 2011 Survey of Expenses, Central Bureau of Statistics 

The Housing Stage

Yair Assaf-Shapira

In 2011 construction was completed on 1,360 housing units in Jerusalem, A construction completion always marks the end of a long, multi-stage process that includes construction entrepreneuring, developing a detailed plan and securing its authorization, acquiring a permit and initiating the construction, and the construction process itself. Given the length of time between the start of a construction enterprise and its completion, all stages of the process should be examined; a change in policy today might have a long-term effect on the number of housing units.

During the same year construction was initiated on 2,160 housing units, exceeding the number of housing units that were completed. This figure could conceivably indicate that the number of housing units to be completed in the future is expected to increase, but a review of past trends in fact reveals that during every year since 2005 the number of housing units initiated has exceeded the number completed (except in 2008). In all, since 2005 construction of 14,950 housing units was initiated in Jerusalem, but the number of units completed, including units initiated before 2005, was only 12,960. The difference (1,990 housing units) results from suspension or extension of some construction projects. This gap is not unique to Jerusalem. In Israel as a whole it stood at 24,430 housing units since 2005. In all Administrative districts, excluding the District of Judea and Samaria, the number of housing units initiated was larger than the number of units completed.

Before construction begins there is the planning stage, which can entail long periods of waiting for approval of the plan. In 2011 in Jerusalem plans were approved for 4, 765 housing units. Presumably not all of these planned units will be actualized, and the percentage implemented will be significantly lower than that of units whose construction is underway.

By comparison on a national level, Jerusalem’s portion of all completed housing units in Israel is 4%, and the city’s portion of housing units initiated in Israel is 5%, yet the housing units approved in Jerusalem in 2011 represent 16% of the total number of approved units for Israel. 

Data sources: Construction Data – Central Bureau of Statistics, Planning Yearbook – Planning Authority, Ministry of Interior Affairs 

How Do Jerusalemites Spend Their Money?

Aviel Yelinek 

The Central Bureau of Statistics recently published new data regarding the breakdown of monthly expenditures of households in Israel’s cities. The breakdown of monthly expenditures is one of the indices used in assessing the socio-economic standing of cities’ residents.

In 2011 the average expenditure for household consumption in Jerusalem stood at NIS 13,100 per month, which was lower than the figure for Tel Aviv (15,400) and Rishon LeZion (14,900) but higher than the figure for Haifa (12,100) and Ashdod (12,500). But these figures do not give the full picture. An average Jerusalem household comprises 3.9 persons, which is the highest number among the major cities. A more accurate picture therefore requires us to examine the total average expenditure per person. Accordingly, the statistics put Jerusalem in the last place among the major cities – the average expenditure per person in Jerusalem stood at NIS 3,300, which was lower than the figure for Tel Aviv (NIS 6,800), Haifa (NIS 5,100), Rishon LeZion (NIS 4,800), and Ashdod (NIS 3,700).

The greatest expenditure of Jerusalem’s households, like that of the households in most of Israel’s major cities, is housing. Jerusalem’s residents expended some NIS 3,650 monthly on housing, and this figure constituted 28% of their total monthly expenditures. Other major expenditures included food (16%), transportation and communication (16%), education, culture, and entertainment (13%), and maintenance of the home and household (10%). Haifa residents were the exception in this context, as they expended more on transportation and communication (23%) than on housing (22%).

The amount of expenditures on food is relatively consistent across the major cities, but there are differences in taste. For example, in 2010 the average Jerusalem household expended about NIS 340 per month on bread, grains, and bread products, as compared to NIS 230 in Tel Aviv and NIS 240 in Haifa. The average Jerusalem household expended about NIS 400 per month on meat and poultry, as compared to only NIS 225 in Tel Aviv and Haifa. In contrast, the average monthly expenditure of Jerusalem households for meals outside the home stood at NIS 240, significantly lower than the figure for Tel Aviv (NIS 690) and Haifa (NIS 330). 

Source: Analysis of data from the Central Bureau of Statistics