On the rebound

After a 60-year decline, Haifa is on its way up.

Aerial view of Haifa (photo credit: COURTESY ASHDAR)
Aerial view of Haifa
(photo credit: COURTESY ASHDAR)
During the past four years, real-estate prices in Haifa have been rising faster than in other cities in Israel. In some areas of Haifa, they rose by nearly 50 percent. This is because prices were very low and attracted much investor demand.
The rise in real-estate prices ironically reflects the decline of Haifa since 1948. The current increase reflects the opposite: Haifa is once again on its way up. The city is undergoing a rejuvenation. The 60-year decline is being reversed, and real-estate prices have rebounded with a vengeance.
There are two main reasons for the sharp rise in real estate prices since 2010. The first is that in the lower areas of Haifa, at the foot of Mount Carmel, prices were very low. The second reason is that Haifa is a university city with two institutions of higher learning – the University of Haifa and the Technion-Israel Institute of Technology. In a university city, demand for rented accommodation is high. Consequently, investors bought properties in the lower part of Haifa and rented them out at prices that provided an annual yield of 8 percent and more. Today, when the price of real estate has risen sharply, yields have fallen to around 5%. But even these are respectable yields in an environment where interest rates on bank deposits are at historic lows.
But before surveying the current real estate scene in Haifa, here is a little background.
During the 30-odd years of the British Mandate in Palestine, Jerusalem was the official seat of government and Haifa was the nerve center. It was the economic, military, industrial, commercial and, most importantly for Britain, the maritime center. It was country’s only deep-water port, as the one in Gaza was for fishermen and the one in Jaffa was a shallow water port. The same could be said for the port of Tel Aviv, which needed constant and expensive dredging; and even then, large ships could not be berthed there.
Large cargo ships anchored offshore, and their cargoes were offloaded into lighters. Passengers from cruise ships disembarked into tenders.
In addition to being a deep-water port, Haifa was the Mediterranean terminal of the Iraqi pipeline. Consequently, Haifa was surrounded by all the trappings of an empire. Important military bases, depots, workshops and industries set up to supply the needs of the garrison not only in Haifa but in all of Palestine. All this required a large civilian population. As a result of British needs, Haifa grew and flourished.
All this ended with the British Mandate. When the last British soldier boarded the last troop ship for Egypt, Haifa began to experience a decline in its fortunes, which continued for more than 60 years. As the industrial center of gravity shifted towards the metropolis of Tel Aviv, the decline in the economic fortunes of Haifa accelerated, and this had a direct bearing on real estate. Demand for housing was lower than in other parts of Israel, and the rise in real prices was negligible compared to Tel Aviv.
But why are things changing now, and how will these changes affect the real-estate scene in Haifa? The mayor of Haifa, Yona Yahav, is the driving force behind the rejuvenation of the city.
“How can the current developments in Haifa affect real estate in the city? The answer is simple,” he says.
“Economic growth creates consumer demand, and that includes real estate. What we are doing to generate economic growth is upgrading the infrastructure of the city, such as the Carmel Tunnel. Creating the right environment that encourages economic activity of all kinds generates economic growth. In the past few years, we have invested over NIS 6 billion in upgrading roads. We have enlarged the hi-tech industrial park MATAM at the southern entrance to the city from a built-up area of 100,000 square meters to 250,000. We are constructing a biological hi-tech park with a built-up area of 80,000 sq.m. And we have turned the area around the port into a vast academic complex. All this is generating economic growth; consequently, demand for housing is increasing. And the demand for higher-quality housing is increasing as well,” he says.
Yahav adds that the municipal plan is to “connect the city to the sea, which is the city’s greatest asset. The Tel Aviv-Haifa railway will be sunk into the ground to create an open area from the city to the sea as is common in Mediterranean port cities such as Piraeus and Naples. We plan to open up part of the southern part of the port as an entertainment center, which will be enlarged when the military anchorage is moved to its new location in the North,” he says.
Another sign of the change is that fact that the annual issue of building permits has doubled compared to 2010.
Dror Aloni, the manager and owner of the Anglo- Saxon real-estate agency in Haifa, agrees that things are moving in the right direction.
“The dramatic price increases in certain parts of the city are a thing of the past. Prices have now reached what I describe as realistic. There is still very substantial investment demand, but prices are rising only slightly.
The average price for a second-hand four-room 100- sq.m. apartment in the Carmel area is NIS 1.2 million to NIS 1.5m. An average three-room apartment of 75 sq.m. costs NIS 1m. to NIS 1.2m. New apartments in the area cost NIS 20,000 to NIS 24,000 per square meter,” he says.
If demand remains at its current level, prices are set to rise in the future because there is no available land for building purposes. Consequently, there are not many building projects in the city, but building continues.
Ashdar has a project called Trio, close to the University of Haifa. It is comprised of three residential towers of 20 to 21 stories, with 300 apartments in all. Another project is the Mirnav Bashemura project, which constitutes two 20-story apartment buildings with a total of 156 units.
Haifa is built on a mountain, the Carmel. The least expensive housing is at the foot of the mountain, while the most expensive is at the top. The difference in prices between the areas is very marked and is greater than in other large cities in Israel. In Hadar (mid-Carmel) and the lower town, prices are very inviting. Hence, that is where investors tend to buy properties. They can buy two- and three-room apartments for as little as NIS 500,000.
Yet investment demand is holding strong. The supply of housing for rental outstrips demand, and the result is a fall in the price of rentals.