August 4, 2021

Tel Aviv homes with parking fetching premium prices

Globes, Hadas Magen, 04.08.2021

A year after the new reduced parking regulations came into effect in Tel Aviv for new homes, prices for apartments with parking are rising at a faster pace than for apartments without parking. The new building regulation stipulates that developers can only provide one parking space for each two apartments in the city center (zones 3, 4, 5 and 6) and four parking spaces for each five apartments in the north, east and south of the city (1,2,7,8 and 9).

Real estate appraiser Erez Cohen, who has been researching the prices being asked by developers that are marketing new apartments throughout Tel Aviv, has found that since the new policy was approved, there has been a substantial rise in the prices of apartments with parking compared with before the regulation was approved, even though new apartments are not yet being built with the new regulation. Cohen said that this price rise already includes the expectation of a future shortfall in parking due to the new parking building regulations.

Cohen's firm also examined and found that while price of a new four room apartment with parking in zone 5 was NIS 5 million in the second quarter of 2020 (before the new parking regulations were approved), by the second quarter of 2021, a four room apartment without parking was selling for Nis 5.1 million, while the price of an apartment with parking had jumped to NIS 5.5 million.

In the Yad Eliyahu neighborhood, Cohen found that between the second quarter of 2020 and the second quarter of 2021, the price of a four room apartment with parking had risen by NIS 400,000 from NIS 2.3 million to NIS 2.7 million, and in zone 4, prices had risen NIS 500,000.

He said, "The comparison found that throughout the city there was a rise in new apartment prices with parking at between 10%-17%. These are significantly high rates of annual overall apartment price increases and in Tel Aviv in particular. Due to these findings, there is room to estimate that the change in parking policy by the Tel Aviv - Yafo Local Planning and Building Committee has played a part in the price rises of new apartments with parking around the city."

"In the city center, only half of apartments will have parking."

Promote Parking Solutions CEO Udi Drezner identifies a complex trend. He explains that following the cut in parking allocations for new homes, developers are consulting him to see how they can maximize the number of parking spaces in a building. He said, "Since parking has become a very valuable product, they are not compromising on the quality. When you sell apartments at these prices, you need to provide a quality product. You see this trend worldwide, that the parking element has risen. For people buying an apartment in Tel Aviv, buying an apartment without parking is not an option."

Israel Builders and Contractors Association Tel Aviv and Central District CEO Eli Rosenthal said, "When I sell an apartment in Tel Aviv for many millions, without parking, that's a problem. The concept of cutting parking space regulations is correct but has come before its time. We are in favor of reducing the parking space standard, but only after the public transport picture in the Tel Aviv metropolitan region has been completed.

"With all due respect, we will only see the Red Line in 2023, and that alone is not enough. In order for us to abandon the car, we need an extensive network of public transport and that's not going to happen any time soon. Even when the Green Line and Purple Lines are added in the future, that won't provide an overall solution. And even when this network is operating, what will they do on Friday and Saturday (public transport does not operate on the Shabbat), if I want to visit parents that live in the north or the son serving as a soldier? We will have to own one car. In practice, in the center of the city, for example, only half of tenants will have parking spaces."

What has happened to the price of the parking component as a result of this?

"People are talking about NIS 600,000 to NIS 700,000 because demand outstrips supply. The price of parking has soared crazily in the center of the city, and rightly so. The price of the apartment certainly won't go down. We proposed that they keep the existing regulation and allow the conversion of parking space in the future to part of the apartment, and really in many urban plans that's possible. It's possible to change parking areas into storage rooms or to clinics. It could work in 10 years. Meanwhile not a single line of the light rail is running, so it's not possible to come and demand it now because the concept is wrong and before its time."

Avi Rumani, owner of RTLV Real Estate, which improves the value of land in Tel Aviv, thinks that the policy has been implemented too quickly. "Once the regulation stood at one parking space for every 40 square meters of office. Today it is one parking space for every 240 square meters of office. In a process in which you are trying to introduce re-education, the transition must be gradual and implemented when there is a solution. Today, for whoever lives in Tel Aviv and even more so outside of Tel Aviv, the only solution is a car."

Tel Aviv deputy mayor for transportation Meital Lehavi makes it clear that the new regulation is only binding for new urban plans and not on building permits issued on the basis of valid plans, and so she said, "The influence of the reduction of the standard will only be seen in another five years or more, and by then the transport alternatives will be operating throughout the city.

"We understand that even when all the transport solutions are provided, the need for parking won't disappear, with even electric cars and autonomous cars requiring parking when they stop, are waiting, charging or just sleeping at night. Therefore, the local committee has the discretion, which is conditional, for example, on the level of public transport service and the type of housing. We are legally examining the option of not attaching parking to housing units and converting the parking space to alternative uses in order to allow several uses for the parking space as well as several uses for car parks."

"Parking is disappearing

"What is interesting, Cohen said, is that you can already see the gap between the price of an apartment with parking and without parking - and this will become bigger. "We would expect that an apartment without parking would sell for a lot less than an apartment with parking but the gap is not so large because people are beginning to realize that it is possible to buy an apartment without parking. This element of parking is disappearing. In the future, not every apartment will have parking and the housing market without parking won't be inferior to the housing market with parking. The explanation was that people won't buy apartments without parking but today it is clear that that is thinking from the past, and this trend of not buying apartments without parking, will disappear."

Developers operating in Tel Aviv back up Cohen and say that it is already possible to sell apartments in Tel Aviv without parking.

Most of the 355 apartments in Azorim's Exchange project at the Elite Junction in Ramat Gan have three or four rooms. Only a few of them are larger. In Ramat Gan, like Tel Aviv the parking space allocation for new housing has fallen below one per apartment and so not each unit in the project has a parking space.

"We were very fearful," admits Azorim VP marketing Gil Gurevitz, "that people would not agree to buy apartments in the project because of a lack of parking. The default feature of a three room apartment is no parking, and whoever wants parking must add NIS 200,000."

And what has actually happened?

"We were surprised to see that many people did not buy parking. We have already sold dozens of apartments like that. Although most buy with parking, there is a minority that are prepared to go without. Even though the light rail Red Line will run right outside the project, we still see today this trend, mainly in Tel Aviv, but I believe that as time passes, people will understand the significance, and the trend also will grow and expand outside of Tel Aviv." Eco City CEO Illy Berr, who is engaged in urban renewal in Tel Aviv, is getting the message from customers. "In large apartments," he said, "There is still demand for parking, although even there we are beginning to meet buyers for whom parking is not a deal-breaker. It won't happen for an apartment worth more than NIS 6 million but we have sold in our project on Amsterdam Street, two 115 square meter mini-penthouses, for prices touching on NIS 6 million, without parking."

Berr believes that for small apartments the parking is worth NIS 400-500,000, while in larger apartments parking can even make up NIS 1.5 million of the price. The cut in parking standards only affects new urban planning and not current projects, so Eco City does not see any broad change, but Berr remarks, "It is clear where the trend is going, and the market will price this."

Published by Globes, Israel business news - en.globes.co.il - on August 4, 2021