For rent from the nylons: “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 Transzilla for credit card clearing, lives in the “Quarter” project in the Wadi Salib neighborhood in the lower city, owned by Golden Art, which is building long-term rental projects. It should be noted that in this case these are not state-subsidized projects But on housing projects built on private land and intended for this purpose.
“Like living in a hotel.” Ayelet Zarhiyahu
(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 here. It was considered a dangerous area in the city, but today it is very attractive. “
Zarhiyahu 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 is here I feel at home. Like living in a hotel at an equal price for everyone.”
Ayelet Zarhiyahu: “The rent is not rising due to the landlord’s collapses, and I have no fear that they will suddenly sell the property and evacuate me in favor of the grandson who decided to move to the neighborhood. I have a management company that takes care of everything I need.”
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 purchase apartments, may increase the inventory of apartments for rent at the expense of first-time home buyers.
The industry estimates that in the coming years the demand for rental apartments is only expected to increase. 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.
It is important to take into account that rental prices for projects in areas of demand are higher than for the project in Haifa, for example, or in other areas in the second circle of the center of the country. For example, some of the Reit funds purchase apartments in luxury residential projects, and the rental prices accordingly – for three rooms they can also reach a rent of about NIS 7,000, so the price is not always worth every penny. On the other hand, as mentioned, these are new apartments managed by an index-linked management company and the rent.
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 exploring the possibility of merging it with another government company in order to streamline its operations.
In addition, companies such as Magorit, Azorim and Aura entered the industry, setting up REIT funds that 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 rent.
“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 change the legislation in the Rites Law, and reduce the number of years the company has held the project from 20 to 10 years. This, in order to make the industry more attractive among institutional investors in projects of this type. The Rits Act passed in government in 2016, but other than a few hundred apartments purchased for rental purposes, 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 that will invest in apartments designated for this purpose, with an emphasis on projects for rental apartments at a regulated rent 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.
Price per occupant project and long-term lease in Yavne
(Photo: Doral S. And Rami Shabiru)
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 the 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, it clarifies that the market is on the verge of changing and increasing the apartments that will be offered for rent by institutional investors. “This awakening is due to the 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. “But 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. Today, most players entering the long-term rental market see the return from the increase in the value of apartments on the day they can sell them. We are not building the projects for permanent lease. “
“In the next decade, about 100,000 apartments will be added to the market for long-term rent.” Daniela Paz Erez, CEO of Paz Economics and Engineering
(Photo: Dror Nahum)
“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 a mortgage for decades to come can enjoy long-term corporate rent. “.
“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 ‘multi-family homes’, 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.
According to Gabi Levy, CEO of Ashtrom Franchising, part of the Ashtrom Group, “We are currently working with the government company, but are also considering promoting projects that are not part of an apartment for rent. Institutional rental housing is the right solution for affordable housing in Israel, and we strongly believe in long-term rental. “He said, the company is considering the possibility of building long-term rental permanently.” Currently, the cost of residential construction and similar rental construction is the same price for 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.”
Reminder: Where apartment prices have soared
(Photo: Meshi Ben Ami, Yaron Brenner)
“The nature and design of rental housing projects is different from residential construction for sale,” says Shimon Ginny, CEO of the Golden Art Group. “In such projects the mix must include more small apartments, there is a large amount of housing units on the floor and additional public spaces and services are required. , 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 who are looking for stability without fear of being evicted or dealing with the mortgage burden. This field needs to take root even more in Israel, as in Europe and the rest of the world, and it is very significant for dealing with the housing crisis. “
Haim Karadi, CEO of Praszkowski, also adds that “the fact that there is a ‘father and mother’ to the building – is one of the great advantages of projects of this type. We are also building such projects in Florida, USA, and this model works great there, “he concludes.