What will the Tel Aviv light rail do to home prices?

Tel Aviv light rail

When the light rail starts operating 10 years from now, it should lift demand in some of Greater Tel Aviv's less sought-after areas.

The Greater Tel Aviv light rail project will continue for many years, but once it is running it will change the face of the region, for better or for worse. 

Meanwhile, Tel Aviv will be jammed with traffic, unbearable to drive or even walk in (in certain places), but the light rail should make it easier to reach the city, even for those who want to move on its streets. Will this affect the prices of homes in the Greater Tel Aviv area? After all, the suburbs will be closer to Tel Aviv as soon as the railway starts operating. The answer is complicated; it depends on location, proximity to the railway station, and other factors.

Whither housing prices?

"Hard now, easier later," is the NTA Metropolitan Mass Transit System Ltd.'s slogan for the work on the Greater Tel Aviv light rail. That it is hard now is fairly obvious, mainly to Tel Aviv residents and visitors. When will it be easier? Maybe in another decade. If you ask Tel Aviv elders, they don't care about the future transportation project, from which they may never benefit. They're suffering now from the noise, dust, the need for detours on their way home, and the need to avoid piles of sand, building materials, and garbage. In general, they say, the beneficiaries from the light rail are those coming into Tel Aviv from outside it, not the city's residents.

According to the plan, by 2024, there should be three main rail lines in the Greater Tel Aviv metropolitan area: the Red line, the Green line, and the Purple line, which will carry an aggregate 600,000 passengers daily. The light rail will shorten the time needed to reach Tel Aviv from the adjacent cities.

It is therefore believed that there will be movement of people from Tel Aviv to the neighboring cities in order to lower their housing costs. Surveyors have commented widely on the subject, arguing that someone buying a home in Tel Aviv suburbs such as Holon, Bat Yam, Bnei Brak, Petah Tikva, and Ramat Gan, will benefit from significant enhancement of the price within a decade, after the light rail begins operating, and that areas in the second ring around Tel Aviv will also see higher home prices.

Beyond the transportation benefit and easy access to the entire Tel Aviv metropolitan area that the light rail aims to provide, its environmental advantage is that it will run on electricity, thereby saving air pollution and noise. Every one of the 90 trains will have one or two carriages capable of carrying up to 500 passengers. 

NTA is responsible for the project, in contrast to the regular railway, run by which Israel Railways. Foreign companies with at least five years of experience in the sector will operate the lines for the first 10 years. Some anticipate problems in this area because of the experience requirement. The companies will also be 51% partners in the line. NIS 250-270 billion will be invested in the construction of the entire project, entitled "the Tel Aviv Metropolitan Mass Transit System." Cost overruns on the Red Line - the first line, on which construction has already begun - have already reached NIS 2 billion.

Where will prices rise?

From experience in other cities, prices of housing located near the light  rail stations in central Tel Aviv are liable to fall a little, due to the noise, the influx of people, and the surrounding hubbub. The planners, however, have taken care to site the stations at a distance from residential buildings. Ostensibly, further away from the stations themselves, usually between a few dozen meters to 100 meters, prices are likely to rise, because residents will benefit from proximity to the light rail system, without suffering from crowding.

In more distant cities in the Tel Aviv metropolitan area, proximity to the light rail and access to the big city (actually, in all the cities in the Greater Tel Aviv region), will have a positive effect on prices, depending on distance from the station, although in certain cases, proximity to a station could have a negative impact on prices.

According to assessments by surveyors and economists, prices can be expect to rise substantially in Petah Tikva and Ramat Gan when the light rail begins operating. Owners of housing units in Jaffa D (the cheapest neighborhood in Jaffa) can also expect to benefit from higher prices, because they will be able to reach central Tel Aviv from Jaffa in minutes. Prices of 2-3-room apartments in this area, which now cost approximately NIS 1 million, are projected to rise steeply.

Elevated stations are planned along Jerusalem Boulevard in Jaffa; the period when the digging takes place constitutes a real nuisance, and can even cause a drop in prices (and rents). Here, too, however, property prices are expected to go up when the light rail starts operating.

Surveyors believe that the light rail will revolutionize Bat Yam. The city is current divided into two main areas: the beach promenade area, where demand exists from Israelis and foreign investors and tourists for home ownership and rentals, and the Ramat Hanasi, Ramat Yosef, and other areas, where most of the buildings are old and prices are low. The light rail will connect the different part of the city, and both parts to Tel Aviv. This is likely to raise housing prices there. The same thing is likely to occur in Rishon Lezion.

What about Tel Aviv?

In Tel Aviv itself, the light rail will be more useful to those coming to it from outside. Prices near the stations will therefore be less affected by it. They will be more affected by the regular demand for residences in Tel Aviv, which has been raising the value of homes in the city for years.

The area around Allenby Street is an exception; surveyors and realtors believe that the light rail, which will pass along this route, will help break through the invisible wall between the northern part of the city and its central and southern parts. Housing prices in these areas are accordingly expected to rise significantly.

Published by Globes [online], Israel Business News - www.globes-online.com - on July 2, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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