Rents resume steep rise

After a pause in the first six months of the war, rents in Israel are again on an upward trend, with new tenants especially affected.

The effect of the war on the rental market has been erased, and in the past few months the rate at which rents have risen has increased. This emerges from analysis by "Globes" of figures released by the Central Bureau of Statistics. According to the figures, in the first six months of the Swords of Iron war, the rate of rent rises slowed considerably, but, starting eight months ago, landlords have started to raise rents more steeply, making it look likely that rents will continue to rise in the near future.

The Central Bureau of Statistics’ data show that the nationwide average rent for a four-room apartment reached NIS 5,200 monthly in the third quarter. In Tel Aviv, the average monthly rent for such an apartment was NIS 8,500. It was NIS 5,900 in Jerusalem, NIS 3,800 in Haifa, and NIS 3,000 in Beersheva. Rents in the center of the country are almost equivalent to the monthly repayment of a mortgage on the same kind of apartment.

The problem is not just for tenants. Rents are an important component of the Consumer Price Index, comprising 25% of the index, and so when rents rise rapidly, it puts upward pressure on the official rate of inflation. In the past year, the housing services index, which reflects changes in rents, has risen by 4%, while general inflation has been 3.4%. It follows that had rents not risen so steeply, the rise in the CPI would have been closer to 3%.

Closer examination of the housing services index since the beginning of the war reveals two trends. From October 2023 to February 2024, the index hardly moved. The entire rise was recorded from March 2024 onwards. The annual rise in the housing services index since the second quarter has been 5.5%.

Further data released by the Central Bureau of Statistics strengthen the assessment that the forces pushing up rents are at their height and that the rising trend is likely to continue. The figures are for the change in rent when there is a change in tenant. New tenants are the most vulnerable market, since landlords tend to raise rents by more in their case than when extending the lease for an existing tenant. The Central Bureau of Statistics began to publish separate data for new tenants in July 2022. Until the beginning of the war, they showed that the rent for a new tenant tended to be 6-9% higher than for the previous tenant of an apartment. In November 2023, however, the gap narrowed to less than 5%, and by April this year it had shrunk to 2%.

The apparent explanation is the war, in which both landlords and tenants were drafted into the reserves, and which turned the existence or otherwise of a protected area in the property into a deal breaker, and also made people less interested in looking for an apartment, or for a tenant, with rockets and missiles flying overhead.

In the past few months, however, the average rise in rent for a new tenant has increased to 4%, and the general trend is upwards.

Published by Globes, Israel business news - en.globes.co.il - on December 24, 2024.

© Copyright of Globes Publisher Itonut (1983) Ltd., 2024.