Herzliya Pituah homes become harder to sell

Herzliya Pituah Photo: Eyal Reuveni

The number of deals in the wealthy Israeli neighborhood has been cut in half and prices have fallen nearly 30%.

Hanging out "For sale" signs is just not done in prestigious homes, neighborhoods, and communities. Wealthy sellers do not want it known that they are trying to sell their property - people might think they have a problem with simply buying more, and it is also clear to everyone that a few "For sale" signs are liable to detract from a prestigious image by indicating that there might not be a surplus of demand over supply.

For example, in the community of Savyon northeast of Tel Aviv, there is an explicit order banning "For sale" signs. The same is true of Akirov Towers in Tel Aviv, but not in Herzliya Pituah. A trip around the neighborhood reveals more and more "For sale" signs, some new and some old. "There are homes in the neighborhood that have been on sale for three or four years," desperate real estate agents admit.

Let it be clear: the steep decline in purchases of luxury properties, mainly by foreign residents, has been evident for a long time everywhere in Israel. In contrast to areas where the involvement of foreign residents in real estate deals was not the main part of the market, however, foreign residents have been responsible for 70% of all deals in Herzliya Pituah for years, and deals there have ground to a halt. According to figures from the Madlan website, based on actual deals registered in the Israel Tax Authority, 75 deals took place in Herzliya Pituah in 2017, compared with 102 in 2016. The average price in the 2017 deals was lower: NIS 4.8 million, compared with NIS 6.3 million in 2016.

From NIS 8/£ to NIS 5/£

Veteran Herzliya Pituah realtor Uri Tal says, "The severe recession in the neighborhood is mainly the result of reduced activity by foreign residents. A large proportion of the foreign residents in recent years were French people who bought properties in Herzliya Pituah. The money they brought to Israel was not always acquired legally, and there was no problem about it. Today, as a result of the Prohibition on Money Laundering Law and Israel's agreements with international agencies, any money coming to Israel has to be backed by proof that it has been legally acquired. "A great number of deals in Herzliya Pituah fell through after contracts were signed because of this restriction. Suddenly, after the deal was signed, the buyer had to present authorizations that he didn't always have, and that cut into the French market. In addition, fewer buyers are coming from other countries, such as the UK, the US, South Africa, and Australia. While for years 70% of the buyers were foreign residents and 30% Israelis, the ratio now is just the opposite."

At the same time, Tal believes that despite the extreme slowdown in deals, not all of the buyers are in a hurry to lower their prices. "None of the residents in Herziya Pituah is selling his home in order to get money to pay the grocer, so there are properties that have been up for sale for three or four years, and the sellers aren't lowering their prices, because they don't want to be exposed in public. Deals are taking place, but there is no market fever. Someone who really wants to sell will lower the price, once he or she realizes that there won't be a better bid.

"Most of the deals today are for prices in the NIS 5-10 million range for lots of up to 0.5 dunam (0.125 acres), and the buyers are either families looking for better housing, young couples whose parents live in the neighborhood and help them, or developers buying a house in order to demolish or renovate it, or to build on the property. There are very few deals for one-dunam (0.25-acre) lots at higher prices."

In addition to the burdensome regulations imposed on foreign residents, the value of their money has also changed. The euro and the pound sterling, which were formerly worth NIS 5 and almost NIS 8, respectively, are now worth NIS 4 and NIS 5, respectively. As a result, the properties that foreign residents can afford are worth less than in the past. Furthermore, the drop in global real estate prices has made overseas investment more attractive than Israel, where the trend in prices is always upwards.

Activity by foreign residents has declined everywhere in Israel. A review published this week by the Ministry of Finance chief economist stated that purchases by foreign residents totaled 1,700 in 2017, 25% fewer than in 2016, when purchases were 32% fewer than in 2015. The Ministry of Finance added that this is the fewest real estate purchases by foreign residents since 2003. One of the reasons is obviously the regulations applying to money transfers from overseas to Israel.

"Conventions are having a negative effect"

Advocate Tal Benenson, who represents active investors in Herzliya, also mentions the high taxes imposed on purchases of luxury properties - 10% for someone buying a housing unit that is not his or her only unit over NIS 5 million. "The current situation in the luxury home market is stagnation at best and a dramatic fall in prices for sellers who have to sell at worst. As a representative of buyers with strong economic capability, we're looking for deals, but only at an attractive price. Today, there is a very large supply of deals in luxury neighborhoods, especially in Herzliya Pituah. Well-off sellers with special properties are in no hurry to sell. A client of ours is selling a luxury home on a one-dunam (0.25-acre) lot on Shalva Street for NIS 20 million, and is unwilling to compromise on the price. He is aware that he is going to have to wait for a buyer for whom the house is suitable. On the other hand, we come across many sellers in need of money who are substantially lowering the price. In addition, there are a few houses in the hands of receivers that are also dragging down prices in the neighborhood."

On the other hand, Anglo-Saxon Herzliya Pituah owner and CEO Eytan Blumberg believes that what is happening is merely a slowdown over the past two years, not stagnation.

He says, "It is true that the market has changed. It is more difficult to sell properties, and the number of deals has fallen 50% in comparison with previous years, but deals are still taking place. While in the past 50% of buyers were foreign residents and 50% Israelis, today 80% are Israelis and only 20% foreign residents.

"Someone who really wants to sell a property has to post a realistic price. Even when prices were still going up everywhere in Israel, they stood still and began to drop slightly in Herzliya Pituah. The buyers and sellers know this, and so they know that you can't demand an unrealistic price; you have to fall in line with the market."

Published by Globes [online], Israel Business News - www.globes-online.com - on February 27, 2018

© Copyright of Globes Publisher Itonut (1983) Ltd. 2018

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Herzliya Pituah Photo: Eyal Reuveni
Herzliya Pituah Photo: Eyal Reuveni
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