Property boom to moderate in 2007

High demand for luxury apartments in tower buildings in the major areas will continue, but prices are set to stabilize.

tel aviv property 88 298 (photo credit: Courtesy Remax Platinium Tel Aviv)
tel aviv property 88 298
(photo credit: Courtesy Remax Platinium Tel Aviv)
A booming local real restate market this year, despite the war in Lebanon, is poised to get another but more moderate boost in 2007 on the back of a continued influx of foreign buyers and a weak US currency. "Despite the Lebanon war, the number of property deals in 2006 increased by 21 percent compared with 2005, on the back of a weak US currency which opened up buying opportunities for locals, and the rising trend of Jewish buyers from France, the US, the UK and Belgium," said Bernard Raskin, regional owner of Remax Israel, referring to a survey of Remax's activity across the country. "We expect that in 2007 prices will continue to rise similar to this year driven by high demand, which is not met proportionally by growing supply." Raskin added though that in July this year, Remax experienced an 8% drop in the number of property deals compared with the same month last year, but the market recovered swiftly in August with a 14% increase. "2006 was a brilliant year, where we saw apartment prices grow by more than 10% in the center and Tel Aviv area, while 30% to 40% of the apartments were bought by foreign residents," said Guy Blushinsky, CEO of Global Real Estate, who is involved in eight swanky residential development projects blossoming in the heart of Israel's bustling metropolitan center, including the "NAM 5" 30-floor tower in the Tel Aviv Zameret housing project, where apartments cost between $5,000 and $8,000 per square meter. "Until now, we already sold 30% of the Nam Tower - which will be ready by mid-2009 - to foreign residents mainly from the US." High demand for luxury apartments in tower buildings in the major areas will continue, but prices are set to stabilize. "The projects which are still under construction, will be sold in no time, but the issue next year will be the construction and development of new projects due to the limited availability of plots, which have become outrageously expensive in the Tel Aviv and center area," said Blushinsky. "Already now, I have a lot of clients from abroad, who are seeking to buy, but I don't have many apartments to sell." Blushinsky added that in recent months, there were signs of a massive entry of foreign residents buying plots of land for the construction and development of residential housing as well as commercial property. Meanwhile, the 2007 outlook survey by Levi Itzhak, editor of the Property Prices magazine, predicts that prices in the major cities will grow by 10% in Jerusalem and 20% in Tel Aviv and the center, driven by the continuing demand from foreign buyers. Itzhak's survey predicts that next year, the high demand for luxury apartments in Jerusalem by foreign residents is set to continue and will spill over into additional areas such as the Katmonim neighborhood, besides the traditional foreigner favorites of Rehavia, the German Colony and Baka. Prices for all types of apartments are expected to rise by an additional 5% to 10% and more because of the increasing shortage of properties for sale, in particular for mid-range flats, which are defined as apartments with elevators and parking but lacking other signs of luxury. This is because contractors are focusing building luxury apartments and the secular population is leaving Jerusalem to Maale Adumim, Modi'in, other areas around Jerusalem and even Tel Aviv. Benny Loval, manager of real estate company Anglo-Saxon in Jerusalem, pointed to an increasing demand for apartments in the center of Jerusalem by British Jews, who are expected to come to Israel during the Hanukka and New Year holidays to buy properties in Jerusalem. "The strength of the pound sterling against the US dollar and the shekel and the rise of Islam in the UK, as well as the stable security situation in Israel are the main triggers for this trend," said Loval. Anglo-Saxon noted that this month, the company sold five properties in Jerusalem for a total of $2 million to British Jews. Other areas of growth next year include the town of Shoham, where prices are predicted to grow by 10% to 15% amid high demand and low supply. Five-room apartments could be sold for as much as between $280,000 and $300,000 according to Itzhak's estimates. Apartment prices in 2007 in areas along the seaside such as the marina in Herzliya are set to increase by 12%, while Bat Yam seaside apartment prices are expected to rise by 30% after the city's investment into development of the beachfront and new housing. Even as the areas in major cities become more expensive, however, housing values in the peripheries and poorer neighborhoods are expected to continue to be down in 2007 as developers show no interest in buying plots of land in those locations.