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

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