Is Purchasing an Apartment in Tel Aviv still a good Investment for 2020?

By JASON BLACKSHAW

JUNE 23, 2020 12:46

Updated: FEBRUARY 17, 2021 12:20

The Israeli real-estate market has been subject to great fluctuations in the last 20 years. So we decided to venture out with real-estate experts and see what they think of an apartment as an investment option for a client. And if it's real-estate we’re after, we decided to focus on the relentless real-estate hub, Tel-Aviv, and together with the real-estate experts, check out where the best investment channels are in Tel-Aviv, what they think about south Tel-Aviv and other secrets.

Why invest in an Apartment rather than the Stock Market?
You can say that Israel 2020 offers 2 main investment channels: real-estate and the stock market. Both have their advantages and disadvantages. Investment in an apartment as opposed to the stock market differs in many ways, some of which include taxation, transactions costs and maintenance, leveraging, dispersal ability, correlation versus returns on other assets and more.

Nevertheless, our real-estate experts revealed the advantages of purchasing an apartment, and the data is certainly interesting:

Investment returns on stocks fluctuate far more than apartment prices and their return hence, stocks are riskier than apartments.
Real-estate can be enhanced, for example older apartments that are being sold for a few hundred thousand shekels less and are located near buildings being
upgraded within the “Urban Renewal” scheme ,benefit from an appreciation of the asset.
Real-estate investment is easier to leverage than stocks (mortgage market).
In early 2007, ever since the global financial crisis, real-estate investment has generated the highest return.
There are additional significant attributes, psychological aspects (walls of a house are
physically visible unlike numbers on a computer screen), lack of control over the investment and a basic uncertainty, which are not for the faint of heart.
Apartments are perceived as a stable and safe asset that retains its worth and achieves much higher returns than conservative investment channels.

Where in Tel-Aviv is the Best Real-Estate for Investment?
If you have made up your mind to purchase an asset in Tel-Aviv, which are the recommended neighborhoods?

✔ Quarter 4 – from Even Gvirol, east up to Namir and Hayarkon Park to the north, is considered a strategic location and a very profitable investment. This area, as per Tel-Aviv quarter plan, allotts more building permits than other quarters, which enables genuine urban renewal.

Erecting new buildings with parking by demolishing and rebuilding rather than reinforcing and adding to the existing, which is less recommended.

✔ New Lamed Neighborhood- another neighborhood worth investing in, as the area is developing rapidly and has been under construction over the last few years. The neighborhood borders on Sde-Dov Airport, dividing between North Tel Aviv and the beach! Definitely an attractive location.

✔ Kerem Hateimanim Neighborhood- the prices in this neighborhood haven’t been low for quite some time, and still, one can say that this neighborhood has not yet reached its peak. Many urban renewal projects alongside restaurants and pubs and the new hipster vibe, coupled with its proximity to the beach, the marketplace soon to undergo a major face-lift and the sister model neighborhood Neve Tzedek, make Kerem Hateimanim a particularly worthwhile area for investment.

What about Tel-Aviv South? Pros and Cons

Tel-Aviv south still follows a different beat. The advantages for investors are of course the prices, which have not yet reached the numbers seen in the central locations. There are massive urban renewal projects covering multiple building areas, which are slowly changing the face of the neighborhood from a simplistic community with a low-income population, into a bourgeois community with gyms that will transition into a real SoHo within the next 10 years, if not sooner.

Examining the Cons:

Some areas are lacking in Healthcare and Education facilities, necessary for families, in comparison with the city’s central and northern areas
Many of the lots in the city’s southern area have a shared wall creating a web-like crowdedness
The housing culture in the city’s south is still a long way away from that of the city’s central and northern areas
The cheap housing prices and upkeep costs in the city south is the basis for higher volume of refugees in the area, which still impedes certain areas from being developed and renewed in the near future.

Once Location is Chosen, How to Choose an Apartment to Invest in?

The return an asset yields- one of the important criteria. In Tel-Aviv center for example, the return is close to 3-4%, and considered very good.
Accessibility- An apartment more appropriately set-up for people with disabilities will definitely be considered a better investment. Accessibility also pertains to how accessible the neighborhood is to major intersections, public transport and other convenient amenities.
Target Audience- young, high-end target audience, above average and higher, young families, highly impacts how attractive one location is over another.
Apartment division by-laws- There are several regulations regarding certain streets where local authorities have decided permits to divide an apartment can be obtained.
National Outline Plan Feasibility- Exists for buildings intended to undergo certain upgrades where the common elements belong to all tenants.
Apartments with option to alter division of interior space- old apartments in need of renovation where converting the space will create a better interior division, opening a verandah and adding additional space.

Tel-Aviv is an eternal city and has always been the hottest target in Israel for real-estate investment. The demand for apartments is higher than it has been in the past, however it is important to take into account the many fluctuations and changes in the market, and consult a real-estate expert on the matter.

In collaboration with MyPlace.