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Investment trends in Israel

It may come as something of a surprise, but The Bureau of Real Estate Appraisers in Israel recently revealed that contrary to popular belief, it is the yield in small apartments that yield a greater return than do larger apartments, with higher rentals.

The new concept of "Micro Living" we have seen on the rise in Europe has traveled to our shores and is being integrated into a significant portion of the new development programs of our city centers. By micro we mean smaller, one or two-room apartments in great locations.

The planning committees and the local authorities are encouraged by the target audience these new micro-apartments attract; young, single urbanites or couples without children both of whom have no need for expensive services such as playgrounds, kindergartens, community centers, or parking. Additionally, this "micro-living" trend has spurred a new wave of cutting-edge design in the fittings and furniture industries making these even more attractive investments.

According to the planning committees in Israel, most of the employment areas that will be rehabilitated in the coming years will combine housing with employment. Apartments up to 50sqm will be integrated within employment towers, and in some cases will also house hotels, as the year on year demand for business rooms in employment areas has steadily increased, with all-year-round occupancy. The new employment areas being looked at in the first wave are in the areas of Ramat Gan, Hod Hasharon, Ramla, and Rishon Lezion.

Based on data from the Central Bureau of Statistics, the average annual return on an average monthly rent of NIS 4,000 is 3.18%. The rent for a 1-2 room apartment is NIS 3,233 per month, but the average yield is 3.83% compared to that of 3.78% for a 2.5 room apartment and 3.56% for a 4-3.5 room apartment.

While this data shows favorable yield returns of small dwellings, there are certain cities where yields can be found to comfortably cross the 3% threshold in large dwellings. According to the data, these tend to be family-centric cities, where the demand for larger apartments is higher, for obvious reasons.

If you’re looking to buy a property in Israel as an investment you need to be vigilant and do the research. Alternatively, allow GPI to help you find good and attractive investments.

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