In August a report by Israel’s Ministry of Finance Chief Economist claimed that public sector employees were responsible for 25% of housing purchases in the first quarter of 2021. Some sources in the real estate market claim that tech employees, with far above average salaries, as well as valuable shares and options in their companies, are also responsible for the housing boom.
But according to Geocartography Knowledge Group, headed by Dr. Rina Degani, who specializes in urban economics, a survey among 300 tech employees working in the Tel Aviv Metropolitan region found that tech employees aren’t “to blame” for the rises in the real estate market because most tech employees are young and still haven’t bought an apartment.
According to the survey, Israel’s tech sector had about 400,000 employees at the end of the third quarter of 2021 (about 11.5% of Israel’s salaried workforce) and the level of monthly gross salaries ranged between NIS 17,000 and NIS 28,000 compared with an average national salary of NIS 12,000. These tech employees may be beginning to save money but many of them have not yet got onto the home-owning ladder, according to the survey’s findings, which will be presented at the Israel Real Estate Summit on November 22.
4% of techies live with their parents
Dr. Degani stresses that throughout the years, public sector employees have bought many of the homes for investment. Public sector employees tend to be older, with seniority, and over the years have saved large amounts of money, which allows them to buy real estate. The Geocartography report found that only 9% of home buyers for investment work in the tech industry, slightly below their percentage of the work force. On the other hand, among 38% of real estate buyers for investment, one of the couple works in the public sector, twice their percentage of the workforce.
Nadlan Center co-CEO Dan Kachanovsky said, “Developers and marketing people in many projects have recently begun strenuously courting techies with the aim of bringing more buyers and branding projects as exclusive. In practice the situation is different. The data in the survey presents the true picture for the first time: excessive representation of 38% from the public sector as real estate investors (purchasing second homes or more) testifies to the fact that the financial strength and belief in the real estate sector actually comes from this sector.
He also points out that associations representing public sector employees, like the Police Fund, offered members very attractive offers for new homes in projects started even before the real estate boom.
The Geocartography survey found that 55%-60% of tech employees live in homes that they own, with the remainder renting accommodation and 4% still living with their parents. About 30% of tech employees have bought a home in the past three years.
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“We will feel the major impact of tech employees in the coming few years,” says Dr. Degani, “when many of these employees buy their first and second apartments. The available money that they will have for expensive apartments and big mortgages can fuel in the first stage small luxury apartments – according to their needs – and then for larger apartments.”
About 30% are considering continuing to rent
Geocartography’s economists stress that despite their gradual penetration into the real estate market, about 42% of tech employees still don’t own a home, while 56% own one apartment and 2% own two apartments or more.
Other surveys by Geocartography have found that among tech employees living in rented accommodation, 30% are considering continuing to rent for some times while at the same time buying an apartment as an investment. This trend is more marked among those paying higher rents.
Regarding future plans, 33% of respondents said they intended buying an apartment over the next three years, meaning that tech employees will make up a larger proportion of the real estate market. This figure is consistent for employees of tech companies that have held a major exit as well as with companies that have not.
Fueling demand in Central Israel
The average budget for buying an apartment for tech employees is around NIS 1.7 million (including mortgage), which is close to the price of the average apartment in Israel. About 48% are allocating NIS 1.5 million for purchasing an apartment, 22% are allocating up to NIS 2 million and 19% between NIS 2 million and NIS 3 million.
According to Geocartography, the survey shows that tech employees are still not yet highly active in the real estate market, among other things because of their young average age. It is possible that they are fuelling demand to some extent in central Israel, but with the amounts of money they are allocating out of their high salaries are not for high-end properties but rather something that suits their current financial capabilities.
Published by Globes, Israel business news – en.globes.co.il – on November 18, 2021.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2021.