About a year and a half ago, I remember seeing an article in Globes about the promise of a rise in prices of apartments in the neighborhoods surrounding the Tel Aviv Central Bus Station. The head of the Israeli Appraisors Association was even quoted as predicting that the price of apartments would triple over the next ten years. The reason for this was the plan to construct a college in what was the old Central Bus Station and to encourage students to rent apartments in the area.
A similar plan was implemented in Jerusalem in order to bring life into the center of town. Students studying there were encouraged to rent apartments in the center and in return they were promised a large discount on municipal taxes (arnona) and discounts in tuition. The Tel Aviv Municipality planned the same thing for the area surrounding the Old and New Central Bus Stations of Tel Aviv.
Unfortunately, this has not happened. Some new projects were built and many people encouraged to purchase these apartments based on the fact that the prices were still low and that there was a promise of an improvement in the neighborhood. But this improvement hinged upon the plans of the Tel Aviv Municipality to build the college and encourage students to move there; promises which never materialized.
Instead, these neighborhoods are filled with foreign workers from Africa, many of whom have come into Israel illegally. According to the Office of Immigration there are over 50,000 illegal workers in Israel. The bulk of these people are living in the south Tel Aviv neighborhoods of Neve Shaanan, Hatikvah and Shapira.
A year ago a two room apartment fetched 2800 NIS a month in rent; now the same apartment will rent out for 3500 NIS a month. A one room apartment which would be worth 1600 NIS in rent last year now gets 2300 NIS a month. The price of these apartments are low compared to apartments in other places in the city. If the price was extra low, due to the bad condition of the apartment, then the apartment owner could earn 15% on his investment as opposed to the usual 3% earned by owners of residential apartments rented out for residential purposes in other areas.
This may all change if the government decides to deport these illegal workers. In the meantime owners of these apartments are earning a nice profit for very little investment. If the workers are indeed deported then there is always the hope of the Tel Aviv Municipality realizing its plans for the improvement of the neighbor hood, thereby causing a rise in the price of apartments there.