Ra'anana is an old bastion of affluence north of Tel Aviv that has for many years attracted demand from wealthy residents. Ra'anana differs from other cities with luxury housing markets: it has no beach seafront or view of the Jerusalem Western hills, which make housing prices more expensive, and has no neighborhoods that could be described as highly luxurious.
"In Ra'anana, people look for streets, and sometimes at sections of streets, with private housing units on large lots, in quiet locations not far from the city center. They are the most affluent," says realtor Avi Saltsman from Traklin Real Estate. He says that land prices in the city are as high as NIS 10,000 per square meter, and go up 20% for the luxury streets. Streets such as HaAvoda, Hatzanchanim, part of Hahagana, Hashomer, and other are in this category. Since most of the city consists of low-level construction and there are also many houses, the supply of houses is fairly large in comparison with other places in central Israel.
As in other cities in which draw foreign residents, including Netanya, Herzliya, and Jerusalem, there are two levels of luxury housing in Ra'anana. One is "less-expensive" luxury of housing units priced at NIS 4-5 million, most of the buyers for which are Israelis. These include houses, penthouses, and mini-penthouses in new projects and projects that have undergone Tama 38 urban renewal. The second level is homes sold for NIS 5 million or more, for which there are some Israeli buyers, but for which the proportion of foreign buyers increases with the price.
"I wouldn't necessarily call houses sold for NIS 4-5 million luxury housing," Saltsman says. "A small house in the city costs NIS 4 million, and that's not luxury. I think luxury housing is for NIS 7.5 million or more. The penthouses now being built are more duplexes, usually with prices in the NIS 4-5 million range.
"Where 'ordinary' penthouses are concerned, the problem is that they are usually located in old buildings in the town center, without security rooms. People nowadays attach great importance to security rooms. A renovated and good-looking penthouse in a 25 year-old building is offered at a price between NIS 3.5 million and NIS 3.7 million."
A local land appraiser has a different view of these things. "The penthouse market in the city is changing. You see a lot of creativity among Tama 38 developers. They build large duplexes with 25 square meters of net space on the roof, large luxurious apartments, with underground parking and a storage room next to the parking space. At the same time, the population in Ra'anana is very elderly, and owners of houses no longer need them; they want to move to rooftop apartments, or to move away to Tel Aviv."
Only three penthouses for NIS 5 million or more
Is the luxury market really slowly changing in Ra'anana, with new construction pushing out old luxury housing? Statistics for 2018 show a clear picture. Of the 19 deals for NIS 5 million or more, only three were for penthouses: one on Hagalil Street for NIS 6.77 million, one of Borochov Street for NIS 5.3 million, and one of Alexander Penn Street for NIS 5.2 million.
For deals in the NIS 4-5 million range, however, the proportion of luxury high-density construction in luxury housing increases to 40% of all the deals. What stands out in these deals is a strong presence of new contractor housing units. In other words, it is possible that luxury housing in Ra'anana really is undergoing a low turnaround as a result of the supply of new housing in the new Neve Zemer neighborhood , but also in Tama 38 projects closer to the town center.
"The days of unreported capital are over"
At the same time, owners of old houses find them difficult to sell. "There are houses being offered for sale for NIS 12 and NIS 15 million, and it is very hard to sell them," Saltsman says. "The target audience for them is foreign residents, but today, unlike in the past, housing can't be bought with unreported capital. Many purchases by foreign residents were once with unreported capital, but that's over. Any money that you bring has to be reported to the bank. This has brought the market to a halt."
The fall in purchases by foreign residents is clear. Out of 12 deals for properties for NIS 15 million or more in the city in the past two decades, 10 were in the first half of the current decade, one in 2009, and one more last year. The most expensive deal in Ra'anana in 2018 was a house on a 0.5-dunam (0.125-acre) lot on Chipman Street purchased for NIS 15.2 million. The volume of deals also shows that the gala days of luxury real estate in Ra'anana have gone. In 2012-2014, three houses were sold for NIS 20 million or more, while no deal since has reached this level.
What are owners of big houses, who could once sell them for NIS 10-20 million, and today have no buyers, doing? "Some people live in an illusion. They are pricing their properties unrealistically," says Saltsman. "They're moving to live elsewhere and still offering their properties for sale, and nothing's happening."
Published by Globes, Israel business news - en.globes.co.il - on April 21, 2019
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