“I live in a new apartment made of plastic. A balcony with a sea view, a gym, a tenants’ club, private parking, and I pay NIS 3,860 a month on a regular basis – including everything. The rent does not increase due to landlord crashes, and I have no fear of suddenly selling the property and evacuating me. “For the benefit of the grandson who decided to move to the neighborhood. I have a management company that takes care of everything I need, and even though I work an hour’s drive, I prefer to return to a designed apartment, which I enjoy living in.” Sounds like a dream or at least a method of living that is more characteristic of Europe? If you ask Ayelet Zarchiyahu (42), a resident of Haifa, the future is here – a long time ago.
Zarhiyahu, VP of sales at Tranzilla for credit card clearing, lives in the “Quarter” project in the Wadi Salib neighborhood in the downtown area, owned by Golden Art, which is building long-term rental projects. Built on private land and intended for this purpose.
Ayelet Zarhiyahu, the Golden Art Quarter Project
(Photo: Ben Salz)
“I am the first tenant to enter the project,” Zarhiyahu continues. “For the last decade I have been renting in the Haifa and Nesher area, and I decided it was time to move to a bigger apartment. The Wadi Salib neighborhood is a bit like Jaffa, the whole lower city has been renovated, there are the most worthwhile pubs and restaurants. You can also take a takeaway and sit next to Corona. It was considered a dangerous area in the city, but today it is very attractive. “
She works in Netanya and prefers to invest in travel. “It’s worth it to me,” she says. “I flirted with the idea of moving close to work, but parallel apartments there cost 1.5 times, and I would not get a new apartment from the nylons. So I decided to stay in Haifa and return to the house I love and not make too much hole in my pocket. I think everyone has a dream to live in the nylon apartment. “My own apartment in Carmiel that I rent, but unlike it, it is precisely here that I feel at home. Like living in a hotel at an equal price for everyone.”
The Corona virus has shaken the real estate industry and the rental market in particular. Cancellation of a price-per-tenant program, declining construction starts and, of course, the economic crisis and unemployment rate – all make it difficult for young people to buy an apartment and commit to high mortgages, pushing their share into the rental market. Israel Katz, to reduce the purchase tax for investors in order to encourage them to buy apartments, may increase the inventory of apartments for rent at the expense of first-time home buyers.
The government has an opportunity to avoid leaving the rental market in the hands of private apartment owners, and to encourage entrepreneurs to enter the institutional long-term rental market, in a way that benefits tenants: the price remains fixed for a long period; The tenants cannot be evicted according to the whims of the landlord; And the developer takes care of the management of the apartments and the building, usually at a high level. Long-term rental solutions can gain momentum with the help of rapid land thawing, incentive for developers with the help of increasing building rights, converting office space for rent for residence and the like.
Today, the government promotes such projects through an apartment rental company, whose tenders have been won by large companies, such as Africa Israel, Azorim, Shikun VeBinui, Ashtrom, Praszkowski and more. However, since its performance since its inception in 2014 has been unsatisfactory, the state is considering merging it with another government company in order to streamline its operations. Companies, such as Magorit, Azorim and Aura, also entered the industry, setting up REIT funds, which purchase apartments and offer them for long-term rent, both in the periphery and in the demand areas. The apartments and projects can be sold by the companies after 20 years of renting.
“The idea is to rent new apartments for periods of five years with the first right to another five years, according to the market price that was at the end of the first five years,” explains Matti Dov, CEO of Magorit. “The contract is very fair, and the tenant does not have to change the environment for A period he will decide on – a significant advantage over living in a rented apartment of a private investor. “Magorit currently manages about 1,500 apartments in major cities, such as Tel Aviv, Ramat Gan, Givat Shmuel, Herzliya, Ramla and Jerusalem.” Some of the apartments we purchased from private and other projects. Of an apartment for rent. The idea is to change the rental culture in Israel. “
Recently, a bill was promoted that seeks to amend legislation in the Rites Law, and to reduce the number of years the company has held the project from 20 to 10 years. This is in order to make the industry more attractive among institutional investors in projects of this type. The British law was passed by the government in 2016, but apart from a few hundred apartments purchased for rent, it did not bring about any real change. One of the reasons the developers pointed out was the length of time (20 years) they are required to own the apartments. Such a long period produces low cash flow and distances capital and institutional people.
The bill seeks to increase the supply of long-term rental apartments through two main measures: shortening the required holding period, along with granting a state guarantee to REIT funds, which will invest in apartments designated for this purpose, with an emphasis on projects for rental rental and discounted market prices. “The state should support this solution, make it easier for the Rits or institutional investors to invest in apartments for rent in Israel instead of abroad,” says Dov.
Daniela Paz Erez, owner and CEO of Paz Economics and Engineering
(Photo: Dror Nahum)
In the coming years, a significant expansion of the corporate rental market in Israel is likely to be expected. According to Daniela Paz Erez, CEO and owner of the consulting company Paz Economics and Engineering, which accompanies an apartment rental company, local authorities and developers in promoting long-term rental projects, “In the next decade, about 100,000 long-term rental apartments will be added to the market. Today, about 30% of the apartments in Israel are rented by private individuals who own them for investment purposes. “However, she clarifies that the market is on the verge of changing and increasing the apartments that will be offered for rent by institutions.
“This awakening is due to a combination of the activities of an apartment rental company, residential housing funds, the activities of the National Committee for Preferred Housing Complexes (and TAML) for the allocation of about 20% of future long-term rental plans and construction projects under the Capital Investment Encouragement Law,” she continues. “However, in my opinion, in order to create a stable rental market, another action must be taken – defining the purpose of renting in city building plans (master plan). Today, most players entering the long-term rental market see before their eyes the return on the value of apartments on the day they can sell. “They are not building the permanent rental projects.”
“Entrepreneurs operating under the Investment Encouragement Law will usually sell the apartments about five years after they are put up for rent, and companies in apartment rental projects will be able to sell the apartments after 20 years. Defining a permanent lease designation will ensure that a stable and growing market for rental apartments is created in Israel.” As we do in many countries around the world, the more we succeed in producing a stable supply of long-term rental apartments, the more it will contribute to market education – and many young people today who have to buy an apartment and commit to it for decades, will be able to enjoy long-term corporate rent, a more suitable and economically viable alternative. “.
Price per occupant project and long-term lease in Yavne. Entrepreneur Rami Shabiru
(Photo: PR)
“The Jewish dream is to own an apartment, but a third of the apartments on the market are rented out,” says Eran Anavim, CEO of Azorim Living, a subsidiary of Azorim that builds long-term rental housing projects. “The vast majority of rental apartments are held by investors. Private, while corporate rental housing includes a few thousand apartments. This situation is different from most countries in the Western world. “In the United States, for example, there are entire complexes called ‘Molly Families’, and it is very common to live there. These complexes are run by a company that rents out all the apartments.”
“Today, the average Israeli has two alternatives,” Grapes continues. “Buying an apartment with financial capital that may be a significant burden for him, but on the other hand there is certainty; and the second alternative is to rent an apartment – a situation that is usually uncertain. Corporate renting offers a solution that combines the two alternatives.” Grapes refers to the corona crisis, which led to an increase in demand for rental housing. “There is no doubt that the rental market will grow and this is an opportunity to produce solutions right now, in a way that will allow developers to promote such projects,” he says.
Gabi Levy, CEO of Ashtrom Franchising of the Ashtrom Group, also agrees. “We are currently working with the government company, but we are also considering promoting projects that are not part of an apartment for rent,” he says. “Institutional rental housing is the right solution for affordable housing in Israel. “And we are big believers in long-term rentals.” He said the company is examining the possibility of building a long-term lease permanently. “Currently, the cost of residential construction and similar rental construction, because it is the same price on the land. “If land prices are lower, it will be possible to justify the risks taken in rental construction,” he explains.
One of the advantages of projects promoted by the state is the fact that about a quarter of the apartments built in projects of this type are subsidized. In fact, the price reflects a discount of about 20% of the market price. These apartments are rented to those eligible through a lottery. According to real estate appraiser Shmulik Cohen of SK Real Estate Appraisal, who specializes in mentoring and supervising real estate projects, to advance the market “the state must dramatically ease regulation and increase the target population living in apartments with reduced rents. In addition, it must increase the economic viability of developers – so that they can choose to build a long-term rental housing track – through a significant increase in incentives. “
Back to Zarhiyahu. If you ask her, she would probably prefer to purchase the apartment she lives in, and yet – she understands the benefits of long-term rental housing. “The project has added value – community,” she says. “You may be surprised to hear, but the tenants’ club really serves us. Recently we, some of the neighbors, prepared dinner, and we ended the evening with a snooker game at the club. It would have happened even without the corona.”
“The nature and design of rental housing projects is different from residential construction for sale,” says Shimon Ginny, CEO of the Golden Art Group. , Which will provide a diverse and quality response to the needs of the tenants. This is usually a population that includes singles and young couples, which contributes to building a community in the project. “
But not just projects for young people, according to Yaakov Atrakchi, CEO and owner of Aura Israel, “this is an excellent solution for families looking for stability without fear of eviction or dealing with the mortgage burden,” he says. “This area needs to take root in Israel, as in Europe. And in the rest of the world, and it is very significant for dealing with the housing crisis. “Haim Karadi, CEO of Praszkowski, also agrees. “The fact that there is a ‘father and mother’ to the building – is one of the great advantages of projects of this kind.” We are building such projects in Florida, USA, and this model works well there, “he concludes.