Developers had a good year in Israel in 2007, but there has been a slowdown in the luxury home market in recent months, belying companies' claims that all is well. Luxury real estate agency Neot Shiran Ltd. says that the slowdown in the luxury home market has been negligible, and that the super luxury home market has actually been flourishing. Several recent deals have fetched fantastical amounts.
The number of deals worth $5-6 million or more has jumped from 10-15 in 2006 and 2007 to 40-45 so far this year. These properties usually involve very large apartments covering an entire floor, buildings slated for preservation, and large lots.
Today, there are Israelis who are no longer satisfied with luxury 200-300-square meter apartments. Developers are now marketing apartments of 500-1,000 square meters and even larger. In the past, tycoons would buy two apartments and consolidate them; now, developers of luxury high-rises are building huge apartments covering an entire floor.
"Location, location, location," is the paean of real estate agents, but for luxury homes, the rarity of the product has primacy. There is no shortage of apartments in luxury high-rises, but buildings slated for preservation are few, and each one has its own unique character. The number of seafront penthouses is also extremely limited. Real estate sources say that prices of $80,000 per square meter for these special properties are no longer as rare as before.
Record prices are being paid for properties with a direct line of sight to the sea, and the gap between these properties and prices for apartments on the second line and farther from the sea has widened dramatically.
Neot Shiran co-CEO Meir Menahem said, "Even in Caesarea, where the first line from the sea is largely imaginary and it's hard to see any blue at all, prices for first-line homes can be double the prices for second-line homes. The differential on Galei Tchelet St. (Blue Waves in Hebrew) in Herzliya Pituah can reach four to ten-fold. In Beit Yannay, a seafront dunam (quarter acre) can cost NIS 20-30 million, compared with NIS 4-6 million for a second line dunam lot."
Menahem adds, "Apartments on the upper floors of seafront luxury high-rises, such as Tel Aviv's Opera Tower, are priced at NIS 55,000 per square meter and up. Apartments on the upper floors of newer and more luxurious high-rises, such as Akirov Residential Tower or Gan Ha'Ir in Tel Aviv, which are not on the seafront, cost NIS 40,000-45,000 per square meter."
In Arsuf there is almost no supply and little demand, which has resulted in a five-fold differential between the first and second line from the sea. The differential between the second line and the fourth line, where it is still possible to have sea view, is 8-9-fold. Until recently, the difference was only two-fold. Menahem notes, "Uniqueness, not just prime location, has become the most important price multiplier."
Data obtained by "Globes" show that 70% of buyers of luxury homes, penthouses, apartments, and houses, are Israelis, and 30% are foreign residents. However, foreign residents account for at least 40% of the purchases of seafront residences. Menahem notes a number of locations where prices are steadily rising, including Herzliya Pituah, Caesarea, and Savion. He says that prices in Caesarea have jumped in the past two years, and prices in Savion have resumed their climb after remaining stagnant for several years.
Published by Globes [online], Israel business news - www.globes-online.com - on August 11, 2008
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