Tel Aviv balks at sky-high living costs – newsdubai

Daniel first moved to Tel Aviv from Australia two years ago. But fed up with the sky-high cost of living in Israel’s hedonistic coastal metropolis, he is already preparing to leave.

The 36-year-old web entrepreneur was drawn to the beach town by its laid-back reputation. But now he and his fiancee have decided to look for somewhere more affordable, rather than continue paying Sh9,500 ($2,900) a month for a 75 square meter apartment.

“[The cost of living] sat me a little against the wall. . . I’d rather buy my own property and pay my own mortgage than be a stupid idiot and pay an arm and a leg just to say I live in Tel Aviv,” he said. “Everything – even a cup of coffee – every single thing you touch, it’s overpriced.”

Daniel and his fiancee are not alone in their frustration with Israel’s high cost of living. Inflation – at 5.2 percent – is lower than in large parts of Europe or the USA. But prices for many goods are already high, now rising at the fastest rate since 2008. Last year, the Economist Intelligence Unit ranked Tel Aviv the most expensive city in the world, and polls suggest the cost of living will be a critical issue in November’s general election.

Tel Aviv is particularly exposed to this pressure. Israel’s tech capital has benefited enormously from the sector’s boom, which has attracted both start-ups and investors. Last year, Israeli tech groups raised $25.4 billion in funding, while the likes of Blackstone and SoftBank decided to open offices in the city. Sleek towers of glass and steel have sprung up to house expanding tech groups, while expensive restaurants and shops cater to their well-paid workers, who make up about a tenth of Israel’s workforce.

But the city has also had to contend with rising inequality, with rising rents and high prices of everyday goods that have displaced working-class citizens. The city was the center of cost-of-living protests in 2011 that remain the largest in Israel’s history, with residents complaining that life is increasingly unaffordable for the less well-off.

“It’s always been an expensive place to live . . . but it really feels like in the last year it’s gotten to the point of being ridiculous,” said Emma, ​​a life coach from Jaffa, a rapidly gentrifying district around the historic port , once best known for its citrus exports.

“For me, it’s the supermarket. I’m single and live alone, and sometimes it just doesn’t make sense for me to go to the supermarket because it’s just as expensive as ordering takeaway.”

Even relatively well-paid residents are not immune to the pressure. “I’m 35 and I have friends around my age and we all have decent jobs,” said Julia, a tech worker who moved to the city seven years ago. “But I don’t think many of them have been able to save much – except for those who were lucky and managed to get opportunities in their company.”

Economists say Israel’s high prices stem from several factors. The retail and import sectors are dominated by a small number of players, as is the food business – where kosher certification adds an extra layer of cost. In sectors such as agriculture, import restrictions protect local producers. “In general, we have insufficient competition,” said Karnit Flug, vice president of the Israel Democracy Institute and former head of the Bank of Israel.

This has been exacerbated by rising property prices. House prices rose 11.6 percent in real terms in the year to March, according to data from the Bank for International Settlements. Rents have followed suit, especially in big cities like Tel Aviv and Jerusalem. In Tel Aviv, an app called “Rent WTF,” which shows users pictures of apartments and then lets them guess — and rage about — the rent, recently went viral.

Flug says a combination of rapid population growth — Israel’s, at 1.6 percent a year, is among the fastest in high-income economies — insufficient building land releases by successive governments and low interest rates had contributed to the rise in property prices.

But in Tel Aviv, the phenomenon has also been turbocharged by the success of Israel’s tech scene, where the average gross monthly salary of Shk26,878 a month is more than double the national average of Shk11,753.

“In the center of Tel Aviv you can currently see rent increases of 7 to 10 per cent. And I don’t see prices falling in the short term. There is just so much demand,” said Julian Nathan, CEO of Hold Real Estate.

“Whatever comes on the market from a sales or rental perspective is moved on very quickly. You have queues of people waiting to look at apartments.”

Israel’s central bank last week stepped up its efforts to contain accelerating prices, raising interest rates for its fourth straight meeting. Activists have also called for reforms to protect tenants from excessive rent increases as well as to increase the amount of social housing, which has fallen steadily over the past five decades. But residents of Tel-Aviv like Emma, ​​the life coach, are not optimistic that the situation will improve.

“Everyone likes to complain here [about the cost of living]but nobody’s really doing anything about it, so I guess we’re all to blame,” she said.

“If you see an apartment and it costs X, and you say: ‘No, I don’t want to pay that’, then someone else will. So it just perpetuates itself and I don’t see any change.”