‘Everything is overpriced’: Tel Aviv balks at soaring cost of living

Daniel only left Australia for Tel Aviv two years ago. But fed up with the soaring cost of living in the hedonistic coastal metropolis of Israel, he is already preparing to leave.

The 36-year-old web entrepreneur was drawn to the seaside town by its laid-back reputation. But now he and his fiancée have decided to look for a more affordable place, rather than continuing to shell out Shk 9,500 ($2,900) a month for a 75m² apartment.

“[The cost of living] kind of put me 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 coffee – everything you touch is overpriced.”

Daniel and his fiancée aren’t the only ones frustrated by the high cost of living in Israel. Inflation – at 5.2% – is lower than most of Europe or the United States. 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 the general elections in November.

Tel Aviv is particularly exposed to these pressures. Israel’s tech capital has benefited enormously from the boom in the sector, which has attracted both start-ups and investors. Last year, Israeli tech groups raised $25.4 billion in funding, while Blackstone and SoftBank moved to open offices in the city. Sleek glass and steel towers 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 grapple with rising inequality, soaring rents and high commodity prices that displace working-class citizens. The city was the center of cost-of-living protests in 2011 that remain the largest in Israel’s history and residents complain that for the less well-off, life is increasingly unaffordable.

Prices of many goods are rising at their fastest rate since 2008 © Corinna Kern/Reuters

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

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

Even relatively well-paid residents are not immune to the pressures. “I’m 35 and I have friends around my own 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 were able to save much, except for those who got lucky and managed to get options in their business.”

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 sector, where kosher certification adds an additional 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 director of the Bank of Israel.

This has been compounded by soaring property prices. House prices rose 11.6% in real terms in the year to March, according to data from the Bank for International Settlements. Rents followed, 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 against — the rent, recently went viral.

Flug said a combination of rapid population growth — Israel’s, at 1.6% a year, is among the fastest among high-income economies — insufficient releases of land for building by successive governments and rising rates. Low interest rates had contributed to soaring real estate prices.

But in Tel Aviv, the phenomenon has also been accelerated by the success of Israel’s tech scene, where the average gross monthly salary of Shk 26,878 per month is more than double the national average of Shk 11,753.

“In downtown Tel Aviv right now you can see rent increases of 7-10%. And I don’t see prices going down in the short term. There is so much demand,” said Julian Nathan, Managing Director of Hold Real Estate.

“Anything that comes to market from a sale or rental perspective is moved very quickly. You have queues of people waiting to view the apartments,” Nathan said.

Israel’s central bank intensified its efforts to contain the acceleration in prices last week, raising interest rates for its fourth consecutive meeting. Activists have also called for reforms to protect tenants from excessive rent increases, as well as an increase in the stock of social housing, which has steadily declined over the past five decades. But Tel Aviv residents like Emma, ​​the life coach, aren’t optimistic the situation is improving.

“Everyone likes to complain here [about the cost of living]but nobody really does 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’, someone else will. So it continues, and I don’t see any change. »

Are you having trouble managing your finances as the cost of living increases? Our editor Claer Barrett and finance educator Tiffany ‘The Budgetnista’ Aliche discussed advice on the best ways to save and budget as prices around the world rise in our latest IG Live. look at this here.

‘Everything is overpriced’: Tel Aviv balks at soaring cost of living

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