Daniel only moved to Tel Aviv from Australia two years ago. But fed up with the soaring cost of life in Israel’s hedonistic coastal metropolis, he is already preparing to leave.
The 36-year-old web entrepreneur was drawn to the beach city by its laid-back reputation. But now, he and his fiancée have decided to seek somewhere more affordable, rather than continue to shell out Shk9,500 ($2,900) a month for a 75 sq m apartment.
“[The cost of living] kind of put me against the wall . . . I would 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 am living in Tel Aviv,” he said. “Everything — even a coffee — every single thing you touch, it’s overpriced.”
Daniel and his fiancée are not alone in their frustration at Israel’s high cost of living. Inflation — at 5.2 per cent — is lower than in much of Europe or the US. But prices for many goods are already high and are now rising at their fastest rate since 2008. Last year, the Economist Intelligence Unit ranked Tel Aviv the most expensive city in the world and opinion polls suggest that the cost of living will be a critical issue in November’s general election.
Tel Aviv is particularly exposed to these pressures. Israel’s tech capital has profited hugely from the sector’s boom, which has drawn in both start-ups and investors. Last year, Israeli tech groups raised $25.4bn in funding, while the likes of Blackstone and SoftBank decided to open offices in the city. Sleek glass-and-steel towers have sprung up to house expanding tech groups, while expensive restaurants and boutiques cater to their well-paid workers, who make up roughly a tenth of Israel’s workforce.
But the city has also had to contend with rising inequality, with surging rents and high prices for everyday staples displacing working-class citizens. The city was the centre of cost of living protests in 2011 that remain the biggest in Israel’s history and residents complain that, for the less well-off, life is increasingly unaffordable.
“It’s always been an expensive place to live . . . but it really feels like in the last year it has reached the point of ridiculousness,” 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 I live alone, and sometimes it just doesn’t make sense for me to go to the supermarket because it is just as expensive as ordering a takeaway,” said Emma.
Even comparatively well-paid residents are not immune to the pressures. “I’m 35 and I’ve got friends around my age, and we’ve all got decent jobs,” said Julia, a tech sector worker who moved to the city seven years ago. “But I don’t think that many of them have been able to save much — except the ones who were lucky and managed to get options 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 costs. 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 compounded by surging property prices. House prices rose 11.6 per cent in real terms in the year to March, according to data from the Bank for International Settlements. Rents have followed suit, particularly in big cities such as 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 at — the rent, recently went viral.
Flug said a combination of rapid population growth — Israel’s, at 1.6 per cent per year, is among the quickest in high-income economies — insufficient releases of building land by successive governments, and low interest rates had contributed to the surge in real estate prices.
But in Tel Aviv, the phenomenon has also been turbocharged by the success of Israel’s tech scene, where the average gross monthly wage of Shk26,878 a month is more than double the national average of Shk11,753.
“In downtown Tel Aviv at the moment you can see rent increases of 7 to 10 per cent. And I don’t see prices dropping in the near term. There is just so much demand,” said Julian Nathan, managing director at Hold Real Estate.
“Whatever comes on to the market from a sales or rental perspective gets moved on very quickly. You have queues of people waiting to look at apartments,” Nathan said.
Israel’s central bank last week stepped up its efforts to contain accelerating prices, raising interest rates for its fourth meeting in a row. Activists have also called for reforms to protect tenants against excessive rent increases, as well as a boost to the amount of social housing, which has declined steadily over the past five decades. But Tel-Aviv dwellers such as Emma, the life coach, are not optimistic that the situation will improve.
“Everyone likes to complain here [about the cost of living], but no one is really doing anything about it, so I guess we are 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’, someone else will. So it just perpetuates itself, and I can’t see there being any change.”
Are you facing difficulties managing your finances as the cost of living rises? Our consumer editor Claer Barrett and finance educator Tiffany ‘The Budgetnista’ Aliche discussed tips on the best ways to save and budget as prices across the globe increase in our latest IG Live. Watch it here.
Source: Economy - ft.com
