New Data Show Tech Workers Are Buying Fewer Apartments in Tel Aviv

The housing market in Tel Aviv, which has already been slowing for some time, is facing additional pressures, the wave of layoffs in the tech sector and the weakening dollar, which are starting to affect apartment demand in the city as well. This emerges from a post published by Deputy Chief Economist at the Finance Ministry Galit Ben Naim, who said preliminary Finance Ministry findings indicate that tech workers are buying fewer apartments in Tel Aviv.

Ben Naim referred to the sharp decline in second-hand sales in the Tel Aviv area published in March, which continued in April, when only 86 apartments were sold in the city, out of 7,000 second-hand apartments on the market. These join a stock of more than 10,000 unsold new apartments in the city, alongside a 34% decline in apartment sales in urban renewal projects compared with last year.

"A decline also in new apartments"

"Preliminary findings show a plunge in the share of tech workers among apartment buyers in Tel Aviv in April, especially among second-hand apartment buyers, where it stood at just 11%, in a city so closely identified with tech workers," Ben Naim said. She added that in the new-apartment segment in the city, their share reaches 18%, "but analyses we conducted in the past suggest this is still a significant decline in that rate."

For years, tech workers have been one of the main drivers of demand for apartments in Tel Aviv, in part because of the city’s high price levels, with a four-room apartment in central Tel Aviv now averaging 5 million shekels. Added to this is the unusual concentration of tech companies operating in the city and its immediate surroundings, which has made workers in the sector a natural and significant target audience in the Tel Aviv housing market. Against this backdrop, any damage to the employment stability of tech workers quickly spills over into the market and directly affects the pace of transactions.

Ben Naim further noted that another notable finding from the April real estate review concerns the composition of buyers, where they live. Among buyers of new apartments in Tel Aviv, most of which are sold off plan, Tel Aviv residents make up only slightly more than a third, 35%, while among second-hand buyers they account for two-thirds, 66%. "This gap is no longer negligible," Ben Naim explained. "If you like, the non-locals, those who live outside Tel Aviv, are the 'x-factor' in the new-apartment segment there. So if you were unable to sell a second-hand apartment, it may be because you did not get the 'factor.'"

She also said that "if you were wondering where those non-Tel Aviv buyers come from, the answer is quite surprising. True, some of them, 12%, still live in the Tel Aviv District, especially in the expensive Sharon cities. Some may be planning to move from single-family homes to towers in Tel Aviv. But there is also representation from cities that we usually have not seen in purchases in Tel Aviv, such as Ofakim, Netivot, Beersheba, Dimona, and other peripheral cities."

"The weak dollar is also affecting"

Ben Naim’s remarks are being reinforced by figures in the real estate industry. Nir Shmuel, CEO and owner of the Shnir real estate marketing group, told Globes: "We handle a large number of projects in Tel Aviv, and we are seeing a decline in demand for apartments from tech buyers. One reason is the impact of the weakening dollar, since a large share of tech workers hold in-the-money options, options that can be exercised at any moment, invested in dollars, so the value of the money in shekels is eroding. The result is a 30% to 40% drop in the apartment-buying capacity of tech workers, which leads many of them to sit on the fence and wait for a better opportunity when the dollar recovers."

CPA Guy Amosi, CEO of Avison Young Israel, also backed this up: "The layoffs in tech will certainly affect additional segments of the market. It is like a stone thrown into water that creates waves, the impact also spills over into the commercial sector and the residential sector. In the end, it is a matter of sentiment, when people are laid off, or feel the atmosphere is unstable, they prefer not to take on long-term commitments."

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