2018 was a tough year in luxury real estate in Ramat Hasharon. There were only 33 deals with a price of NIS 5 million or more, the fewest since 2011, although one of them was one of the biggest deals ever in the city.
There are three basic facts about Ramat Hasharon, which borders Tel Aviv. The first is that it is in second place in Israel, or at least gives Givatayim a fight for second place, in real estate prices. In other words, there are no cheap properties in Ramat Hasharon. The second is that Ramat Hasharon is not a town that attracts foreign residents; its luxury housing market is based exclusively on local demand. The third is that Ramat Hasharon is undergoing changes. The urban building plan, rejected two years ago but likely to resurface in a different version in the near future, will increase the number of housing units in the city from 15,000 to 42,000 by 2035. In 2016, the Ramat Hasharon municipality approved a TAMA 38 policy document, and talks are taking place with the government for a roof agreement to add housing units. (TAMA 38 is a national building plan that allows extra construction rights in buildings reinforced against earthquakes).
"The city is undergoing many changes, but most of them are in the Morasha area, the eastern part of town, where towers are springing up like mushrooms," says appraiser Meor Berko. "It is already difficult to enter and leave the neighborhood, and we hope that they will finish the exit to Highway 4 quickly. Ramat Hasharon is changing rapidly, and will change more in the future. It's not the village that it once was."
Ramat Hasharon's luxury housing market, however, is still based on private housing units in the western part of the city, the part where construction has not changed. Berko believes it will not change very rapidly, because the lots there are small and unsuitable for urban renewal, for example. Another reason is that people with status and influence live there, and they will be in no hurry to change their neighborhood.
"The planning changes are being made in other neighborhoods," says real estate agent Yael Gluzberg from the Real Capital agency.
Two housing units per plot
The most expensive property sold in 2018 was a house on Bustanai Street, which was sold at one of the highest prices for a property in the city - NIS 21.35 million. "This is a new property (723 square meters, according to the Israel Tax Authority website, A.M.) on a one-dunam (0.25-acre) lot. It's a genuine estate; there are few like it in Ramat Hasharon," Berko explains.
Not far away, on Shibolet Street, a new house was sold for NIS 15 million, while a house on Yassour Street and a house on Habanim Street were each sold for NIS 12.1 million. Each of these houses was on a 0.5-dunam (0.125-acre) lot, much smaller than the lot with the house on Bostanai Street.
There is a reason beyond the size of the lot for the big difference in prices between the houses. Some of the lots in western Ramat Hasharon are suitable for construction of two housing units on a minimum lot area of 750 square meters on 60% of the area of the lot, with basements and swimming pools. Other lots can accommodate four housing units for a minimum lot of 750 square meters on 80% of the area of the lot. Five housing units can be built on one-dunam lots, so that the large lots have much greater economic potential than "merely" building a large luxurious house on them.
The fact is that in practice, owners have preferred not to utilize the full rights by constructing a number of housing units, acting instead like the seller of the house on Bustanai Street. They built properties with prices that could compete with properties in Herzliya Pituah.
"You can buy a penthouse or a house for the same price"
Since 2010, the number of deals priced at over NIS 5 million has remained fairly stable at 30-50 a year, despite the rise in prices. The peak for luxury housing deals was in 2017, when the general market in Israel was faltering, especially the luxury market. The paucity of deals in 2018 can therefore even be attributed to a technical correction in the market.
Gluzberg says that even though this luxury market is ostensibly unconnected to the rest of the market, sellers and buyers are aware of the situation around them. When the market downshifts, they also sometimes prefer to sit on the fence.
A look at the figures for 2017 shows that many new luxury densely constructed apartments entered the market at that time, some of them penthouses, and were sold for NIS 6-7 million. The wealthier residents snapped them up. In the 2018, the number of deals for high-density construction apartments was only 10.
"When it comes to high-density apartments, there are very few real luxury buildings in the city," Berko says. "Luxury in high-density construction is confined to a few high-rises, like the one by Gindi on Yavne Street, where there were deals for NIS 5.2-5.3 million, and in many small boutique buildings with special apartments for which prices of NIS 5-7 million can be obtained."
Boutique buildings contain a few apartments, mainly in the TAMA 38 framework, while the special apartments are not suitable for everyone. "Most of the penthouses are duplexes, and old people, who want to sell their old private housing units for NIS 5-6 million, are usually not happy about the stairs," Berko explains. The result is that there are very few real luxury apartments in the market, and when they do emerge, as in 2017, they are snapped up.
Gluzberg agrees that the supply of special apartments in high-density projects is very limited, but adds that this is the reason that the prices of these apartments are climbing. She notes, however, that an anomaly has arisen, because the prices of penthouses and garden apartments have already equaled the prices of private housing units. "For the same price, you can buy a penthouse or a small house on a 380-square meter lot. Many people still prefer the private house," she says.
What about price fluctuations? Since the number of deals is limited, it is difficult to detect a clear trend. The story of a small house on Habanim Street, however, may indicate something about which way the wind is blowing. This house, which was sold five years ago for NIS 12.8 million, was sold in May 2018 for NIS 12.1 million. Gluzberg explains that the most recent buyer thoroughly renovated the property, which explains why he demanded a lower price. On the other hand, the story shows that the property owner was unable to maintain the value of the property he bought five years earlier.
"You have to examine every such property on its own merits, because each of them behaves differently. There are situations in which property owners conclude that it's better for them to compromise on the price rather than be left with an empty property and have to pay municipal property tax and maintenance of the property and the swimming pool," Gluzberg says.
Published by Globes, Israel business news - en.globes.co.il - on May 5, 2019
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