ROM THE GROUND UP: To buy or rent? That is the question

Assuming both options are open, the answer often boils down to whether one can find the property that meets not only the practical needs but ticks the emotional boxes, as well.

By RAPHI BLOCH
Netanya coastline from apartment 521 (photo credit: Uriel Messa)
Netanya coastline from apartment 521
(photo credit: Uriel Messa)
Many of those looking for a new home in Israel approach me with the question, “Should I buy or should I rent?” Although there is no one answer to the question, there are many considerations that can help one reach the right answer.
Many economists claim that renting makes more economic sense because, once financing has been factored in, buying costs more over the long term. While this may be true in a market where property prices are unstable, property in Israel generally retains and even increases its value over the medium to long term. Add to this that rentals, especially in Jerusalem and Gush Dan, are comparatively high due to the high demand from students, visitors on one-year programs and young families who as yet do not own their own home, and you often will find that the difference in the rent paid and the cost of servicing a mortgage is very small.
However, not everyone has the luxury of being able to buy. Banks in Israel are very strict on the amount they will finance on a mortgage, with the norm being only about 60 percent of the assessed value of the property, which is usually quite a bit lower than the market price. This means a potential buyer needs to have about 40% of the purchase price as a down payment. In very rare cases, one may be able to take a higher mortgage, but not everyone can meet the requirements to qualify.
Buying does have many nonfinancial advantages.
When living in your own apartment, you have the security of knowing that you will not be asked to move at the end of a lease, as well as the option of renovating your home to meet your taste. The argument that one does not always know whether in a few years there may be a need to move due to a change of jobs or family size, for example, is one often quoted by pro-renters. In that case, two options exist for the home owner: renting out the current apartment, which is a relatively easy task, or selling and buying another home, relatively easy over the medium to long term.
Many of my buyers tell me that one of the strongest reasons to buy as opposed to renting is the emotional one: knowing that they own a property in the Holy Land. While this is obviously subjective, it does explain why many investors insist on buying in Israel when on paper there are better investments elsewhere in the world.
So, to buy or rent? Assuming both options are open, the answer often boils down to whether one can find the property that meets not only the practical needs but ticks the emotional boxes, as well. As with many things in Israel, this emotional factor is what makes the answer to the buy or rent question differ from one person to another. Ultimately, almost everyone seems to come to the right answer, which I suppose is that there is no one right answer! rdbloch@netvision.net.il Raphi Bloch is manager of the Re/Max Vision real-estate agency in Jerusalem. He previously worked for the Finance Ministry.