This article is by Baruch (Brent) Labinsky
It is an amazing feeling when you actually make the decision to move to Israel, and fix a date for that flight. But mixed with that great amount of excitement, is a definite degree of anxiousness when thinking of the major decisions that need to be made. For most Olim, the most significant immediate decision is where to live, followed the question of whether to rent or buy.
There are many elements and variables within each part of the decision and the thought of all them is very overwhelming for many Olim. It’s probably because we are a product of the era we are living in – of instant gratification and perfection, that we feel we must make the perfect decision immediately. We are used to sending messages and them being instantly received and commented on, photos and videos uploaded and shared simultaneously across continents, access to fast food or food prepared instantly in the microwave. But some decisions and situations require time, thought and planning. Break each element down, think it through and then move on to the next question. Despite the fact that virtually all Olim face the same questions, each person’s unique situation means that their requirements are particular to them, and what works best for some does not automatically work best for others, even those in the same stage of life.
Which part of the country do you move to?
This question has a financial, social and professional element to it.
Some cities and areas are far more expensive than others. That means that not only will the price of renting/buying a home be higher, but often Arnona (city taxes) and other services that the city offers will also be high. All these factors need to be taken into account. Be aware that the Israeli government also has some incentive programs to encourage people to move to less populated areas. If you consider moving to one of those areas not only do you benefit from the cheaper housing and lifestyle costs, but you might also be eligible for financial discounts for having moved there.
Most Olim acknowledge that this is a major factor in their decision of where to move. Uprooting from your home country and comfort zone is not to be underestimated, and most people need the reassurance of a like-minded and culturally similar social circle to make the transition as smooth as possible. There are several very popular very Anglo destinations, but there are also many other slightly less Anglo locations that you might find to be a good fit. Here, too, your decision is weighted on your stage in life. A single person has different needs than a young couple, who has different needs than a young family, who has different needs than a family with older kids. A single person in their early twenties will be looking for something very different than a single person in their sixties. The bottom line is that even though you should consult with other Olim regarding potential locations, your decision will be based on what you feel is important. A neighborhood that is culturally similar is important, but how important is it to you that your neighborhood has Israeli elements too, that you (and your family if relevant) are exposed to the language and culture of your home of choice? Highly Anglo neighborhoods often have higher housing prices, as the Anglo demand will often drive up the cost. Research is the key here. You will be surprised at how many Anglo ‘pockets’ there are in places you had never previously thought of.
Your career choice/path will also be a factor in where you choose to live. If you can work from home, or have a profession such as teaching, you are far less limited in your geographical choice. But if you need to be in a specific commercial area you need to factor in the advantage of proximity (which might be an expensive location) to the disadvantages of a potential commute. The Israeli Transport Ministry continues to invest vast sums in expanding the train infrastructure in an attempt to make more outlying areas appealing to commuters.
Rent vs buy
The good news is if you are still pre-Aliyah or recently arrived in Israel this decision is pretty much a no-brainer. There are many points to consider for renting vs buying, but until you are convinced you know which area you want to live in, don’t rush in and buy any property.
Although you will have done research before deciding on the specific city and area you are moving to, it is only when you are living there that you know if it is the right fit. While no-one is looking to uproot again unnecessarily, it is much easier to relocate if you see the need, when you don’t have a home to sell.
People often resent renting as they feel they are throwing money away, but that isn’t the entire picture. As a tenant you don’t have the responsibility for maintaining the property – those expenses will fall on the landlord. Your savings can stay in investments until you need them to buy your home, maximizing your potential down payment. Renting gives you an excellent breathing space to make a calm and unpanicked decision of where to live.
It’s important to realize that the cost of renting, as a percentage of home values, is relatively low in Israel (2-4% of the value of the property generally). Another factor worth bearing in mind is that the amount of money required for a down payment is relatively high, usually over one third of the value of the home. These two points should be considered carefully when weighing – at least from a financial perspective – what makes most sense for you. If, for instance, you are able invest the funds you would need to use for a down payment at a reasonable rate of return, and are able to rent a “better” home (either in terms of location, size or any other measure) than you could afford to buy as a result of the low rent/value ratio, it might really be the better decision!
Housing prices in Israel rose dramatically in the decade of 2007-2016, leaving many Olim hugely disappointed as they were priced out of the market. The Finance Ministry has initiated many measures in an attempt to help level and then decrease the cost of housing. Prices do seem to have leveled off and dropped in some places (different areas are showing different decreases). This direction should also help you feel more comfortable about renting as the compulsion to get into the housing market before it rises even higher is not as relevant now. Hopefully, prices will drop further, but even if they remain stable it reduces the pressure to buy.
Setting up home in a new environment is a very complex issue. Don’t stress. Take the time to rate what elements are most important to you, do your research … and then make your educated decision based on all your facts and information. Behatzlacha!
Baruch (Brent) Labinsky MBA, TEP, is the founder of Labinsky Financial and an Independent Financial Planner and Investment Manager, licensed by the Israel Securities Authority. Baruch specializes in helping Olim transition their finances to Israel. For the past 20 years Baruch has worked almost exclusively with potential and veteran Olim, helping them realise their dream of a financially secure life in Israel. Hundreds of Olim attribute their success in Israel to the financial guidance and advice that Baruch gave and continues to give them. Baruch’s services include pre- and/or post-aliyah financial planning, retirement planning and investment management.
Baruch is the author of the acclaimed book, ‘A Financial Guide to Aliyah and Life in Israel’. This has become the ‘go to’ resource used by potential Olim when seriously thinking about moving to Israel, and veteran Olim living here.
Visit labinsky.com for more information.
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Updated: April 11, 2019