A substantial wave of deals lately in the luxury housing market in Jerusalem, at prices over NIS 10 million, puts the city second after Tel Aviv for the number of luxury deals in the past eighteen months, "Globes" finds.
Tel Aviv continues to lead the luxury housing market in Israel, and has even consolidated its position in this respect. On a multi-year average, 50-60% of the deals in this market take place in Tel Aviv, which generally also leads in the prices of the properties sold. Herzliya, which traditionally competes with Jerusalem for the number two spot, has been firmly pushed down into third place in the past eighteen months.
Luxury has various definitions, that include location and technical specification, but for the sake of simplicity we define this market as consisting of homes costing NIS 10 million or more. The proportion of such homes in the housing market as a whole is about 0.5%, and, as mentioned, they are mostly found in Tel Aviv.
Herzliya and Jerusalem generally account for about 15% each of the luxury home deals. The remainder are distributed around various cities, generally in the Tel Aviv area and the Sharon.
From "Globes’" inquiries it emerges that of 434 luxury deals carried out from January 2023 to the end of June this year that have been registered with the Israel Tax Authority, 256 (59%) were in Tel Aviv, 89 (20.5% ) were in Jerusalem, and 31 (7%) were in Herzliya. There were 58 luxury deals in other places, headed by Ramat Hasharon (12), Ra’anana (10), Netanya (8), Ramat Gan (6), and Givatayim (5).
That Tel Aviv heads the luxury home table is very natural, or at least has been so since the beginning of the present century. Ten years ago too it topped the table as well, with 50% of the deals.
The steep rise in home prices in Tel Aviv has increased its weight in the luxury home market. In 2020, 52% of the luxury home deals took place in Tel Aviv. In 2021, the proportion rose to 58%. In 2022, when there was a substantial slowdown in the Tel Aviv housing market, its share of the national luxury market fell to 50%, but, as mentioned, in the past eighteen months it has recovered to 59%.
Foreigners flock to Jerusalem
Jerusalem has seen a large wave of home purchases by overseas residents, which has contributed to its rise in the luxury market table.
The peak of purchases by overseas residents in Israel was recorded in 2005-2006, amounting to over 5,000 homes in each of those years. Since then, the number of such deals has declined, amounting to 1,000-2,000 in the past few years.
Something has changed, however, in the pattern of these purchases. In the past, a third of purchases by overseas residents were in Jerusalem, but lately the proportion has doubled, and some of these purchases are at the luxury end of the market, although by no means all of them.
In November 2023, "Globes" reported on a phenomenon that had begun before the war broke out, whereby overseas residents organize to buy together apartments in new projects in the same week and sometimes even on the same day. This happened, for example, in the Midtown Jerusalem project of Israel Canada and the 12 Sarei Yisrael Boulevard project of AR Best Properties.
In the Midtown Jerusalem project, eight apartments were purchased on October 17, twelve were purchased on the following day, and another eight were purchased a week later.
Azorim’s day came on December 21, when it sold no less than 16 apartments in the project it is constructing at 27 Hanevi’im Street in Jerusalem at prices of over NIS 70,000 per square meter. Nine of the apartments crossed the NIS 10 million threshold.
Sources in the Jerusalem real estate market say that this is not happenstance, and that groups of religious Jews from abroad, mainly from the haredi community, are buying together many apartments in the city, apparently because they sense growing antisemitism in their countries.
Herzliya sales slump
On the other side is Herzliya, a city that attracts real estate investments by overseas residents very different from those who buy in Jerusalem. Investments in Herzliya signify economic globalization, the integration of Israeli companies into international markets, and involvement of international financial bodies and others in Israel.
Only 31 luxury deals in Herzliya were registered with the Israel Tax Authority between January 2023 and June 2024, amounting to 7% of all luxury deals in Israel in that period. For the sake of comparison, in 2022 there were 61 deals of NIS 10 million or more in the city, amounting to 12.5% of the total luxury market.
That the numbers are down is apparently an indication that the direction that the country and the local economy have taken, and especially what has been happening here since the outbreak of war, do not attract overseas residents of the type who would buy properties in Herzliya in former years.
Published by Globes, Israel business news - en.globes.co.il - on July 16, 2024.
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