Israel's real estate boom is also pushing up prices in the high-end sector of the property market. 2020 ended with a record number of deals for homes worth more than NIS 5 million, while the number of homes sold for more than NIS 10 million equaled the record set in 2015. From the data available so far, it looks like the trend is continuing in 2021.
What is the difference between a high-end property and an expensive one? Definitions vary but in real estate high-end is basically defined by a combination of a location in especially high demand, scarcity of supply, the size of the property, the technical specifications and design, and last but not least of course, the price, which sums up all the aforementioned attributes.
Expensive is not necessarily high-end
In Tel Aviv there are a lot of apartments worth more than NIS 5 million but they are not high-end properties. But virtually every home sold for more than NIS 10 million is high-end (unless it is acquired in order to demolish it and take advantage of building rights that had not been previously realized).
An annual survey that used to be conducted by the Ministry of Finance chief economist, which has not been carried out in recent years, used to regularly find that deals worth more than NIS 5 million represented about 0.5% of all properties sold. Price rises in recent years and the re-entry of investors over the past year due to the reduction in purchase tax, means that the weight of such deals has doubled to 1%, data suggests. Meanwhile, deals worth more than NIS 10 million, which are definitely high-end, represent 0.1% of all homes sold.
Israel's high-end real estate market is closely connected to the state of the economy and socio-economic factors, but not solely, because many of the players are foreign residents.
Back in 2009-2010 the number of high-end property deals rose sharply but in 2011-2012 they fell sharply following the social protests. In 2014 then Minister of Finance Yair Lapid cooled the market with his proposed 0% VAT law for first time home buyers (which was never implemented), and in 2016, Minister of Finance Moshe Kahlon dragged down the high-end market with his increase in purchase tax for those buying homes for investment.
The fall moderated as each year went by until in July 2020 when then Minister of Finance Israel Katz scrapped the extra purchase tax for investors - thus saving hundreds of thousands of shekels on deals over NIS 10 million - no small amount even for the very wealthy.
For the time being foreign residents are not returning to Israel's real estate market on the same scale as 15 years ago. Research on the matter several months ago by the Ministry of Finance chief economist found that foreign residents still only make up a very small part of Israel's real estate market despite international headlines about record deals, mainly near Tel Aviv seafront, Herzliya Pituah and Central Jerusalem.
More than 40% of the high-end property deals are conducted in Tel Aviv, 16% in Herzliya and 10% in Jerusalem. The rest of the deals are scattered around the country.
Near Tel Aviv seafront, apartments can fetch as much as NIS 100,000 per square meter. These apartments are sold almost exclusively to foreign residents with Israelis who could afford such homes preferring further inland, in the heart of central Tel Aviv, with a view of the sea.
Here are some of the biggest deals over the past year.
The most expensive deal to date in 2021, as first revealed by "Globes" in April, was a 20th floor apartment in David Promenade Residence at 51 Hayarkon Street, which was sold to a foreign resident for NIS 108.6 million. The apartment overlooking the sea is 680 square meters in size with 330 square meters of balconies.
Jerusalem's German Colony contains its fair share of high-end properties, which have traditionally been detached houses. But in recent years, new projects have been built with the latest specifications and prices to match. In one such deal completed last November, an apartment in a new project built two years ago on Harakevet Street (overlooking the railway park) was sold for NIS 20 million.
Also last November, a 270 square meter, five room, fifth floor apartment at 34 Yefe Nof Street in Haifa was sold for NIS 10.9 million, the biggest deal in the city over the past 18 months.
The sea is not the only view that commands a premium price. In Caesarea, on the coast midway between Tel Aviv and Haifa, the sea cannot be seen from most homes, despite its proximity, for topographical reasons, so the highest prices are paid for those homes with a view of the golf course.
There were two major deals in Caesarea reported last November. In the first deal, a 530 square meter, seven-room house on a 1,000 square meter lot on Tal Street in the 13th neighborhood was sold for NIS 14.6 million. In the second deal, a 620 square meter house with 10 rooms on Hakokhavim Street on a 1,200 square meter lot was sold for only NIS 10.9 million. The second deal was for much less even though it was a larger, newer house on a bigger piece of land but was three blocks away from the gold course while the smaller house was overlooking it.
Another neighborhood now often considered high-end is Ir Yamim in Netanya, which has many apartments overlooking the sea. In February a 253 square meter, five-room apartment in a tower in Natan Yonatan Street overlooking the sea was sold for NIS 11.5 million.
Promising start to 2021
In the first quarter of 2021 there were 29 housing deals with a price of over NIS 10 million. Bearing in mind the most housing deals are in the second half of the year, especially in the summer, it looks like 2021 is going to be the strongest-ever year for high-end deals.
Published by Globes, Israel business news - en.globes.co.il - on June 20, 2021
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