The number of luxury housing deals has fallen dramatically over the past year, with the number of deals totaling over NIS 10 million dropping to a ten-year low, according to a comprehensive survey of the mega-luxury market in Tel Aviv by appraisers Shmulik Cohen and Karni Gatraida from the SK land appraisal company. The survey found that according to figures from the Israel Tax Authority, only 119 apartments were purchased for over NIS 10 million last year, compared with at least 150 such deals every year in recent years.
Mega-luxury deals in Tel Aviv.
These deals further establish the fact that Tel Aviv is the real estate capital of Israel - 72 deals, over 61% of all mega-luxury deals, were in Tel Aviv. Far behind were Herzliya with 14 deals of over NIS 10 million and Jerusalem with 13. There were also a few isolated mega-luxury deals in Savion, Netanya, Ra'anana, Ramat Hasharon, Ramat Gan, and Haifa.
An examination of cheaper deals in the NIS 5-10 million range found there were also fewer in this category over the past year, in comparison with 2017-2018.
There has been considerable criticism of this method of measurement, which takes into account only property prices. Apartments costing above NIS 5 million are indeed expensive, but are not necessarily luxury apartments. There are many apartments at this price in Tel Aviv that are not luxury apartments.
The SK survey therefore covers mega-luxury deals signed in Tel Aviv in 2016-2019. These deals were defined as deals priced at NIS 70,000 or more per square meter. An analysis of the data yields several interesting insights.
1. The most expensive project: 55 Hayarkon Street
The first insight is that the most expensive project in Israel is David Promenade Residences at 55 Hayarkon Street near the Tel Aviv promenade and the sea. Developer Henry Taic, owner of the David Intercontinental Hotel, is responsible for this project. At the beginning of the current decade, when the project was still only on paper, it was planned to sell the apartments in it for NIS 55,000-70,000 per square meter. Things changed within a few years, however, and three deals for NIS 140,000-150,000 per square meter on floors 17-19 (the project has 25 floors) were registered in 2017-2019.
The most expensive apartment was a 228-square meter apartment on the 19th floor, sold for NIS 34 million (NIS 149,123 per square meter). Apartments on floors 14-15 were sold for NIS 116,000-117,000 per square meter, and apartments on floors 11-12 were sold for NIS 106,000-108,000 per square meter. For the sake of comparison, in September 2019, an apartment on the eighth floor of Akirov Towers was purchased for NIS 14 million (NIS 67,000 per square meter).
2. Fewer deals and lower prices per square meter
A second insight is that not only were there fewer deals in 2019, but prices per square meter fell. The average price per square meter in mega-luxury deals, which was NIS 93,000-96,000 in 2017 and 2018, fell to NIS 88,000 in 2019.
Cohen says, "The fall in the number of deals and the price per square meter resulted from a decrease in immigration from France and supervision of taxation in cash deals. Overseas buyers of luxury housing care less about purchase tax, and were therefore almost unaffected by the increase in purchase tax in 2015. The market for foreign residents declined, however, with closer supervision of unreported capital and deals not made using reported transfers."
3. Beachfront apartments are substantially more expensive
A third insight from the survey by SK, which specializes in advising and financial supervision for real estate projects, is the large differences in price between beach front apartments and apartments located in the city center. Of the ten most expensive apartments sold in recent years in terms of prices per square meter, only one was not on Hayarkon Street. This was a 100-square meter apartment sold two years ago for NIS 14.75 million at 3 Antokolsky Street. A 434-square meter apartment on the 38th floor of the Meier Tower at the corner of Rothschild Boulevard and Allenby Street was sold for NIS 45 million, NIS 104,000 per square meter, making it one of the most expensive properties sold that was not on the beachfront.
Buyers in 2019 also had different tastes. "People told us that they didn't want outlandishly expensive apartments for NIS 150,000 per square meter. There is a demand for luxury housing, but not socially ostentatious housing," Cohen adds. "The current trend is away from towers to lower buildings, but still penthouses. For example, we're working on a project at the corner of Nachmani Street and Rothschild Boulevard that will cost NIS 100,000-110,000 per square meter. This is the new trend: prime location apartments, instead of extravagant towers."
"Globes": The most expensive deals in recent years were on the beachfront. Were all the buyers foreign residents?
Cohen: "These deals are made for foreign residents. In the other apartments sold at high prices, people are looking mainly for quality of life, privacy, and location. They don't want to live with dozens of neighbors. They have a swimming pool on the roof, a penthouse, and the best fittings. Paying NIS 150,000 per square meter on the beachfront doesn't appeal to them.
"Friends coming from overseas keep the same taste. They want to be next to the sea, because they're used to it from the Riviera. Today's market is usually people who have made millions from technology or people in their 60s and 70s who sold their private homes or apartments in towers, and are looking for these locations, and are willing to pay any price for them.
"In addition to a nice view, a beachfront property is also noisy, and there are many people around, including during holidays. This doesn't suit everyone. For them, the strategic location - Nahalat Binyamin, Rothschild Boulevard - is what's important, not towers with eight elevators. They're fed up with that. This means an end to deals for NIS 100 million or more; that's over and done with. There's no justification for it. If you look at all of these apartments on Retsif Herbert Samuel Street, you'll see than 90% of them unoccupied. People live in the projects on Rothschild Boulevard; they aren't ghost apartments."
Published by Globes, Israel business news - en.globes.co.il - on March 8, 2020
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