Tel Aviv’s landmark Azrieli towers
Azrieli Group will build a new green park near the site of its Tel Aviv landmark 3 buildings, the square, triangular and circular tower. Work is beginning on the fourth elliptical tower. The elliptical tower will also contain hundreds of housing units in its 80 floors.
The new tower will be on the site of the former Yediot Aharonot building (where I once worked) where the neighboring area will also be reclaimed with other new projects.
There is also a projected ‘green park’ and which Azrieli will build in exchange for the tower complex which will cover a section of the Ayalon Highway to create an urban park. The portion of the Ayalon freeway which is slated to be covered with a dome is bordered by Yitzhak Sadeh Street in the south and Arlozorov Street in the north. It will comprise about 15 dunams.
The new park area will be encompassed by dozens of new towers and will include cafes and sports complexes will likely be built in the park. The inspiration for the establishment of a green park over the Ayalon came to the steering committee from similar projects abroad such as Park Avenue, the High Line Park in New York, Miami Beach Park, the Big Dig project in Boston and the London highway covering project.
Israel was recently revealed in a Goldman Sachs study released in the beginning of November to have the dubious honor of being the nation that has seen the highest jump in real estate prices. Prices have soared 40% since 2009 and 72% since 2007. Israel is followed by the nations of Norway and Switzerland that have seen significant rises in the costs of housing but income to housing ratio is more affordable than Israel’s that has seen the greatest gains.
The pent up demand for housing after the slow years of the intifada created a demand for housing that remains unmet. In 2010 the Israeli government took steps that took effect in 2011 hoping to suppress what it too late perceived as a “housing bubble”. The Bank of Israel put into effect down payments restrictions to 40% down minimum and tried to release those holding on to investment apartments by lightening taxes on their sales in hopes of suppressing buyers while releasing more inventory into the market place.
Prices have come down as a result of these actions, but almost as much from the perceptions of buyers that now would not be the “time to buy” in expectation of prices coming down. coinciding with these hopeful perceptions of prices coming down, sellers are still anticipating the expected gains in their prices so that only the desperate who must sell are willing to lower their prices to meet the current market.
New housing coming into the market finds little competition with existing with prices just as high while offering more amenities such as elevators and underground parking but have shrinking rooms for the net meter amounts.
Several months ago the transaction of the large parcel IDF (Israeli Defense Forces) owned land was sold for development for housing to help relieve the housing shortage in the Israel’s largest and fastest growing city, Tel Aviv.
Plans have been released for the 2 new 80 story towers which will be in the central location on the corner of Shaul Hamelech and Weisman streets. The complex will include the office towers and three other apartment towers which will provide 770 new housing units. The new complex is affectionately known as the “toblerone tower” for its triangular shape and resemblance to the famous Swiss candy bar. The project itself is called the “Rockefeller of the Unstoppable (or city that doesn’t sleep) City”. The units will be small, two and three room apartments all measuring 65 and 83 meters.
The eight acre parcel will also includes park areas and bike paths as well as underground parking. The new project will also be serviced by a planned underground tube which is known as the “green line”. The metro will run on the Ibn Gvirol route.
Tel Aviv, along with Ramat Gan and Bat Yam continues rapid growth becoming as I have coined it, the Singapore of the Middle East in the “start-up nation”.
The Central Bureau of statistics reflects what realtors around the country know, demand is down for housing both in the rental and sales markets. Compared to Q1 last January, 2012, apartments sold or built reflect a drop of about 20%, since the prior quarter, demand is down 6%. This drop affects mainly the markets of Tel Aviv and environs and the southern sector.
Demands were slightly better in Haifa and Jerusalem. Many are asking what exactly is the cause of this drop in both the rental and sales markets. Chairman of the Real Estate Appraisors Association, Ohad Danus, claims the drop is a direct result of intentional government sanctions and austerity measures in the marketplace instituted in 2011. He stated, “the developing trend is extremely troubling, because while the natural growth in Israel cannot be suppressed and should even be encouraged, the housing market can be suppressed – and this is what the government has been doing successfully in the past year.”
The recent trauma of rocket attacks last fall as well as the significant drop in foreign currencies such as the US $ and the Euro as well as the British pound are factors in this author’s opinion that cannot be overlooked. Even if foreigners are not entering the marketplace with their currencies, many Israelis have their capitol invested in foreign currency savings accounts. Foreigners entering the Jerusalem market has long been a significant factor and with their currencies down and fears of war heightened fewer foreigners are entering that marketplace.
The good news is for those who have the capital to invest the contrarian view is that 2013 is the year to purchase while prices decline. Experts predict 2013 spring and summer months may see increase in activity but no change for the better in prices for sellers and landlords. There is still plenty of inventory in the major cities but only sellers with realistic goals and who need to sell will be willing to drop their prices to a real market value.
Sometimes statistics and reality just don’t seem to align. Recent news indicates that housing prices are up 4.5% in 2012 and yet agents like myself will tell you the market has never been slower since 2000-2004. As one who primarily deals with real estate in Jerusalem and Tel Aviv and their peripheries, most sellers have had to lower prices 10-15% lower from the highs in 2010 to secure a buyer. It’s possible the statistic reflects this year only and not in relationship to the past three.
Still the price of housing here remains almost punishing in that Israel in its large cities is a market that affords only a small apartment for the price of 128 salaries. Boiled down it means that the average couple earning an average salary each cannot afford basic housing in a major city or periphery with a 30 year mortgage. And yet, somehow they buy.
Traditionally young couples are helped by their parents and moving up the housing ladder has allowed Israelis who already owned for a decade or more to see a significant increase in their property value enabling them to cash out for significant profit. Before the shekel stabilized property was seen as the only way to have a savings account when runaway inflation regularly ate up the value of one’s money. Investors in those times now see a tremendous return, unlike those who invested in real estate in the USA.
A U.S. magazine ranking housing markets globally has removed ISrael from the top ten in housing growth markets. In real terms the statistics reflect a minimum of a 5% drop in major cities where increases had been higher in 2010-2011. Israel has now dropeed to number 27 since the begining of 2012.
It is this author/realtor’s note that around the Jerusalem and Tel aviv markets where I have the most experience, prices have dropped in certain neighborhoods more than others. Due to the recent strength of the US dollar, buyers with capital and the desire to own property in Israel are looking in traditionally Anglo-saxon locations, such as Raanana and the central neighborhoods of Jerusalem, such as Baka, German Colony and other residential areas close to city center. there prices have remained the same as Q2 2011.
Peripheral areas or the cities that are traditionally lower priced have finally made the adjustment that in order to sell and beat competition prices have dropped on popular advertising sites such as Win-Win and Yad2 8-10%.
We recently attended one of the national housing fairs and were bombarded with helium balloon carrying uniformed young people asking us as we entered, “Are you interested in a tower in Givatayim?” We thought, why not, tower living seems to be the hottest trend in Tel Aviv real estate and the on-paper price before construction is often very attractive. By finish date based on present values it could seem that the invest on paper could pay off with an apartment in a luxury tower that is worth nearly 40% more.
It seemed like a lot of hype was involved in pushing this project which will be the tallest tower in Tel Aviv. We found it interesting enough to stop into their offices to check out time frames and prices and to our surprise with all that hype at the fair that there were almost no units left. Because of the height of the tower and the glass corners, three sides will have a sea view.
I began to look at other tower prospects to see that there is enough construction going to say that it is a definite trend. Plots of land are being purchased in Tel Aviv, existing buildings then torn down and a new mega-tower built on the site. On Rothschild Blvd. alone there are two projects heading up to the sky that were sold out almost immediately on offering on paper.
Real Estate markets around the world have placed Singapore and Tel Aviv consistently in the top ten markets. Will the present Tel Aviv skyline soon look like Singapore? The two seaside commercial cities are moving that way. I just hope enough of the beauty of the old Tel Aviv remains, while the development will redeem parts of the city that were shabby anyway and offer more housing to a fast growing metropolis.
The tremors of the Euro and in the US stock market have helped shore up the dollar here against the shekel. At a current rep rate of 3.82 NIS those who were in the property market last year with assets in US currency who forestalled buying now find themselves in the best of positions. Many sellers who bought new apartments from builders in the last year or two that put their selling on hold not wanting to move temporarily to rent while awaiting their new apartment now find their present apartments worth 10-15% less value due to a slight glut in the existing second-hand market.
Haaretz published an extensive article on the current conflict in the Israeli property market; that sellers are reluctant to lower their prices but the reality for those who must sell is “accept a lower price gratefully”.
This is seen by many property agents as a market correction, with government assistance after the stellar rise in values over 2005-2010 that brought prices too high.
This agent has worked significantly in the Maale Adumim market where many young families took the periphery location as a compromise to get more apartment for their money in hopes of mobility in the next few years. This agent’s experience has proved that many units that have been priced at a current popular asking value are sitting unsold months later. I recently noted a very improved newer apartment in an excellent building in that locale with an attractive asking price compared to the competition. I called the seller who already had an offer in a few weeks. They priced themselves about 11% lower than competing properties and sold in weeks.
The number of those under the pressure in the periphery who bought new units on paper are now facing the crunch; ask a realistic and modified price based on current values or sit until forced to move.
If I had a pulpit in the United States I would push the message “Buy now while your dollars are still high!” With current US fiscal policy the strength of US dollar is most likely a very temporary situation. For those who dream of a pied-a-terre in ISrael, now is the time to take the plunge!
According to an independent survey published by Yediot Aharanot, one of the top three news outlets in the country, Israel is the third hottest real estate market in the world with China and Hong Kong as #1 and #2 respectively.
Although 2011 showed a decline in housing prices and closed transactions, a decline in interest rates recently offered by Israeli banks is seeing a resurgence of buyer interest.
Restrictive measures such as the requirement of 40% down payments have still not been lifted, and this author observes there is still a softening of prices from the peak years of 2009-10, but market interest and activity has increased as sellers compromise on prices.
According to the MInister of housing prices of housing have dropped countrywide. New construction is down 11% existing housing by 6%. His theory is that there is a current surplus of housing on the market.
This writer’s theory is that the austerity measures taken by the government to make it more difficult to get new loans has forced the price drop, either passively, for those who are now not able to get a mortgage. Actively it is affected by those who have the ability, qualification plus 40% down payment but understand the market is trending downward and if they wait it out prices will be forced dowm.
The lenient policies of mortgagors here gives opportunity for a homeowner to put off foreclosure and get his financial house in order. Foreclosure is a rare event since most homeowners obtained their mortgage within strict guidelines as well as at least 25% down.
Pscyhologically it is difficult for the homeowner who has seen an annual consistant rise in housing prices have to face the reality that their home is worth 11% less when it comes time to close the deal.
In newer construction neighborhoods, I have observed that the same units are sitting on the market, many since last fall, refusing to lower their price to the new levels. Those who must sell are seeing the 10% drop not in asking but in order to close the deal.