The number of sales of luxury homes in Israel, defined as homes sold for over NIS 10 million, continues to decline rapidly. Although the Israel Tax Authority’s website has yet to publish details of all transactions, it appears that transaction numbers fell 40% in the first half of this year in comparison with the first half of 2022, and by 50% in comparison with the first half of 2021. The decline is similar to the decline in transaction numbers in the housing market in general in recent months, against a background of rising interest rates.
Between 2019 and 2021, the luxury housing market in Israel grew substantially. In 2019, there were 179 deals over NIS 10 million. In 2020, the number rose to 218, and in 2021 it shot up to 559. Last year, the number fell to 475, and in the first half of 2023 there were 83 such deals. On the basis of past experience, it can be estimated that a further 50-60 transactions will be recorded for the period, such that the average monthly number of transactions in the luxury end of the market this year will work out at about 23, the lowest average in the past three years.
Fewer oligarchs, more opportunity seekers
One reason for the decline in the number of deals in the luxury housing market is the almost complete disappearance of Russian oligarchs from it. "There are fewer oligarchs in the market willing to pay any price," says Or Bismut, owner of Bismut Group, a realtor specializing in luxury properties. "At the same time, more Israeli buyers and Jews from overseas are openly telling me that they are looking for opportunities here." And what are these "opportunities"? Sellers who have got into difficulties because of the steeply climbing interest rates in the past eighteen months, and who are now forced to sell at reduced prices.
The disappearance of the oligarchs and the desire of the remaining buyers to find bargains have almost stopped the mega-luxury market, which was very small in the first place, in its tracks. In the first half of last year, over fifty deals were recorded at prices of NIS 20 million or more, whereas in the first half of this year there were only nine such deals, not one of them above NIS 30 million.
Israel’s luxury housing market is mostly concentrated in Tel Aviv. In an average year, about half of all deals in this segment take place in the city. In the first half of 2023, deal numbers in Tel Aviv were down 60% in comparison with the first half of 2022.
The cities with the next highest numbers of luxury market deals are Herzliya and Jerusalem, each of which accounts for about 15% of all deals. As in Tel Aviv, deal numbers in the first half of 2023 in these cities are well down in comparison with the first half of 2022.
Further away from the center of the country, average home prices have fallen substantially. However, the price at which a home is considered a luxury home in more outlying areas is lower than in the center. The number of deals at NIS 3 million or more in the various regions of the country, including in the Negev and Galilee and the Jezreel Valley, shows a general decline in the luxury market there too.
Why is Beersheva bucking the trend?
Nevertheless, in Beersheva, Nahariya, and the Krayot (suburbs of Haifa), luxury deal numbers have actually risen. Appraisers Ohad Vertesh of Beersheva and Yariv Drori of Nahariya say that, in the end, the difference in shekels between a property classified as "luxury" and one classified as "regular" is much smaller in these places than it is in Tel Aviv, and that this could explain the discrepancy. "A penthouse in Beersheva is sold for a third of the price of a similar apartment in Tel Aviv, where the price is NIS 10 million or more," they say. "Everything has become more expensive in the past few years, and if at one time a NIS 3 million property was considered a dream in Beersheva, now it’s considered reasonable." The result: In the first half of last year, 18 homes were sold in the city for NIS 3 million or more, while in the first half of this year the number of such deals rose to 24.
Drori explains that the number of special homes in Nahariya is very small, and that such homes are mainly in the western part of the city, which offers an open view of the sea. "Prices have risen a lot there, because there is almost no supply, unlike in other places in Israel. So prices are high, and buyers are prepared to pay more," he says.
Published by Globes, Israel business news - en.globes.co.il - on July 26, 2023.
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