Rental Homes Surging in Israel as Housing Prices Skyrocket

A general view shows Tel Aviv-Yafo as the sun rises. (Omer Fichman/Flash90)

The Central Bureau of Statistics in Israel reported Monday a significant increase in the number of rented homes in the country, growing at almost double the rate of overall home supply. However, despite this rise in rented apartments, the amount of rental units out of all apartments has increased by just 0.4% between 2013 and July 2022, while housing prices during the same period skyrocketed by 80%.

In Tel Aviv, an impressive 107,000 apartments are currently rented, with nearly 17% (around 18,000 units) owned by real estate companies. Nevertheless, in most other Israeli cities, the percentage of apartments owned by companies is relatively low, and the majority of the rental market is under private ownership, according to the Central Bureau of Statistics’ housing ownership survey.

The average rent in Israel for 2023 stands at NIS 4,368 per month, while apartments with five rooms or more in Tel Aviv command rental prices exceeding NIS 10,000 per month.

The report is based on data from the register of apartments and buildings, utilizing property tax data provided by local authorities for the years 2013-2022.

As of July 2022, Israel had a total of 2.85 million homes, with 801,000 (28.1%) being rented. This figure places Israel in the mid-range compared to other EU and OECD countries. On average, 30.1% of homes are rented in the EU, while the OECD has a lower average of 23.5% of homes being rented.

Countries like Switzerland, Germany, Colombia and Austria have the highest percentage of rented homes, while Eastern European countries have a considerably lower proportion of rental properties, with Albania, Romania, Slovakia, Hungary and Croatia having single-digit percentages of apartments for rent.

The annual growth rate of rented homes is 3.4%, outpacing the general home supply growth rate of 1.9% over the past decade. This indicates a substantial increase in the supply of rental homes, but also suggests a simultaneous surge in demand.

The report does not delve into specific details about the increased demand for rental properties. However, given the soaring housing prices in the last decade and the recent surge in rental costs, it is reasonable to assume that the demand for rental homes far exceeds the available supply.

The surge in housing prices, which rose by 77% in the past decade, coupled with the relatively small increase in the percentage of homes for rent from 24.3% in 2013 to 28.1% in 2022, highlights potential market failures, supply shortages, or mismatches between investor purchases and tenant preferences in different locations across the country.

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