Israel’s luxury residential market had another good year. Jewish year 5766 saw the construction of skyscrapers in Tel Aviv’s Park Zameret, as well heavy demand for lots zoned for high-rises in high demand areas, and unprecedented interest by Diaspora Jews in apartments in Israel for investment.
Anyone entering Tel Aviv from the north, or driving along the Ayalon Highway, can't miss the three 34-storey bluish Alrov Heights (Migdalei Tsameret) towers. Developer Alfred Akirov, chairman and CEO of Alrov Properties and Lodgings Ltd. (TASE: ALRPR), who has marketed the project’s apartments with great success, has set the standard for luxury construction in Israel for those able to pay the price.
According to media reports, former prime minister Ehud Barak bought a 350-sq.m. apartment in Alrov Heights for $2.5 million. Israeli tycoon Sami Ofer bought the penthouse of millionaire Coffee Bean and Tea Leaf Israel franchise holder Baruch Ivcher for no less than $10 million. Shlomo Dovrat is leaving his Savion estate for Migdal Hazameret. Efi Arazi bought a 325-sq.m. penthouse in the first building from US-based real estate developer Mishael Radom. Other residents include Tempo Beer Industries (TASE: TMPO) controlling shareholder Moshe Podhorzer, Yitzhak Dankner, and Kardan NV (TASE: KRNV;AEX:KARD) shareholder and chairman Yosef Grunfeld.
More than anything else, Park Zameret is a status symbol. It’s an address that indicates membership in Israel’s top wealth bracket. Habas HZ Investments Ltd. (TASE: HABS) CEO Herzl Habas was smart when he branded his company’s flagship project in the neighborhood, Yoo Towers, with the name and reputation of super-designer Philippe Starck.
Upon completion, the 297-apartment Yoo project will comprise two high-rises, one 37 stories, the other 41. Occupancy of the first high-rise is scheduled to begin towards the end of 2007. Prices for apartments in the project have been raised several times since marketing began in 2004. Habas began marketing the second high-rise this year, and occupancy is due to begin during the second half of 2008.
The Yoo project is being built on a nine-dunam (2.25-acre) lot that Habas bought in 1993. Philippe Starck is the designer, and Yaski & Partners are the architects.
Neot Shiran Luxury Home Specialty Marketers agents Noam Dzialdow, Meir Menahem, and Eyal Price talk about new trends in the luxury housing market, what is in, and what is passe.
“Globes”: How would you summarize the past year in the luxury housing market?
Noam Dzialdow: “The past year was an important milestone in Israel’s luxury housing market. For the first time since the early 1990s, a clear trend formed of demand outstripping supply in all luxury real estate areas. Prices rose 10-40%, depending on the location, and the number of deals rose 200-400%.”
What drove this change?
“The change was mainly driven by suppressed demand that accumulated in recent years in the luxury market turned from potential to actual this year. In addition, the sense of security that returned to the center of the country greatly affected the level of demand among both Israeli and foreign investors. Another reason for lively demand is the improvement in the economic situation, faster growth, and the feeling that the economy is sturdy. Furthermore, prices are attractive compared with prices of similar properties overseas, especially because of the shekel’s depreciation against the euro.”
Do you think that the war in the north affected, or will affect, the luxury housing market?
“From what we see today, the security situation in northern Israel has not affected the luxury market. Moreover, history shows that post-war periods are often characterized by a real estate boom, especially in the luxury market.”
What were the characteristic trends in Israel’s luxury residential market in the past year?
Eyal Price: “Activity in luxury Tel Aviv high-rises in the past year was characterized by a significant increase in the number of deals executed, thanks to the rise in demand. At the same time, ten luxury high-rises in various locations around the city and whose construction was well timed, came on the market. Half of them were built in the tradition way by contractors and developers, and half were built through organized buyer groups.”
Low supply in north Tel Aviv
“We believe that these projects added 700 apartments, which are being sold at $600,000 per apartment, so that the financial volume of activity has increased 300%. For the same for comparison, in previous years, 150-200 apartments were sold altogether in luxury high-rises in these areas. In addition, demand for apartments along the seafront is above average, and prices have climbed 30-40%, compared with previous years. One of the main reasons for this is heavy investment by foreign residents, mostly French.”
What’s happening in the residential marketing in the northern neighborhoods of Tel Aviv?
Price: “In general, demand is high and supply is low in these neighborhoods. There is especially heavy demand for 400-600 sq.m. houses two to five years old built on dunam (quarter-acre) lots. In Afeka, for example, demand is rising in the north Afeka area, especially for houses on large lots. It seems that we’re again seeing a period when buyers are prepared to pay a premium for an existing large, well-built house in a high-demand area, and they are willing to forego savings they could by building themselves.
“In addition, for the first time, there is talk about lots valued at over $3 million in these areas. All in all, we’re talking about an average price rise of 10% in north Tel Aviv neighborhoods. For large houses, built on large lots of one dunam or more, the average rise in price is 20%, compared with previous years.”
How is the market climate in west Ramat Hasharon and Herzliya Pituah?
“Most deals in these areas are for 300-sq.m. houses on half-dunam (eighth-acre) lots, with asking prices of $1.2-1.5 million. It’s possible to count on the fingers of one hand the number of deals a year for new houses in this area. Demand in this area is usually derived from buyers’ personal preference to buy a house precisely there.
“In recent years, the luxury housing market in Herzliya Pituah has been characterized by a large supply of properties for sale. There was a turnaround in the area in the past year, and we’re now sensing a revival in sales of lots for construction, and of new houses and apartments in the marina. Herzliya Pituah is the domain of foreign buyers, and we estimate that the number of deals has quadrupled compared with the average of previous years. This demand has boosted prices for lots in high-demand areas in Herzliya Pituah 30-40%, and boosted prices for other lots by 10-20%.”
Please give examples.
“The size of a desirable lot, usually including an old house slated for demolition, ranges from half a dunam to a dunam-plus. These lots can be found on Ha’Eshel St., Hakidma St., Kaplan St., and others. Large lots of over a dunam, occupied by fine, large 400-600-sq.m. houses, four or five years old on high-demand streets, can fetch $4-6 million. On the sea side of Galei Hatchelet St., and in other choice areas in Herzliya Pituah, houses can be found for $12-15 million.
“The Herzliya Marina, which was completely stagnant until two and a half years ago because of legal problems over the ownership of vacation apartments, has revived, and demand is far above average. The rise in demand has boosted prices 30-40% for marina projects.”
Caesarea: Large supply, low demand
What about the Savyon and Caesarea luxury residential markets be characterized?
Meir Menahem: “Savyon, has the largest residential lots, ranging from one and a quarter dunam (almost a third-acre) to five dunam (1.25 acres). In addition, it is possible to find double lots in Savyon. It is the only town in central Israel classified as a “rural community”, where it is possible to buy residential lots similar in size to those in a farming village. The residential market in Savyon in the past year saw an increase in the number of deals, but prices rose by no more than 10%.
“On the other hand, the luxury residential market in Caesarea is characterized by a greater supply than demand, except for houses adjacent to the gold course, and in the western part overlooking the Mediterranean. The volume of deals in Caesarea grew in the past year, but prices did not rise much. Only along the seafront were a number of houses sold, and prices rose 30%.”
What’s your prediction for the coming years?
Dzialdow: “It seems that the trend in the luxury real estate market of the past year will continue and strengthen in the coming year. Prices at most sites are still attractive, and could rise further, a fact which buyers and investors have not missed. We believe that, with continued economic growth and expectations that the security situation will stabilize, the trends of an increase in the number of deals and rising demand will continue in the coming years.”
Published by Globes [online], Israel business news - www.globes.co.il - on September 27, 2006
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