The "Globes"-Homeless index for October 2013 shows a mixed picture. Asking prices in the Sharon, Beersheva, and the south rose for all types of apartments, but asking prices in Netanya had the biggest drop in prices, perhaps because summer and the holidays are over and foreign investments are absent.
The rental market, however, is showing signs of weakness. Except for Tel Aviv, where asking rents rose slightly for all types of apartment in October, in the rest of the country, asking rents tended to fall, probably because winter is approaching and there is little demand by students in the middle of the academic year.
In October, the government approved Minister of Finance Yair Lapid's ambitious program to establish a new government company to build tens of thousands of rental apartments, which will increase the supply. However, it is enough to look at the prevailing gross yields on rental apartments, even in remote areas to realize the complexity of new company's task: drawing up a model that will guarantee a return of at least 7-8% on rental apartments. For now, even full subsidies on land in most of the country (which would mean the loss of substantial revenues by the government) would not result in worthwhile returns.
Meanwhile, the Tax Authority is intensifying pressure on tax-evading landlords (income tax has to be paid on rental income above NIS 5,000 a month). Last week, a 65-year old landlord was arrested on suspicion of not paying the 10% tax rate on NIS 19,000 rental income from a Tel Aviv apartment.
Methodology
In contrast to other online classified ad sites, Homeless charges for all ads it airs, which makes sellers quote prices in accordance with their real expectations and avoids freeloaders. The index gives two figures: the asking price of the apartment, and the average rental yield in each area. The listed rent is the gross rent. A month without a tenant, maintenance expenses, taxes (assuming that the rent is more than NIS 4,500 a month), and other costs can reduce the return by about 10% on average.
Published by Globes [online], Israel business news - www.globes-online.com - on November 12, 2013
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