The Ir Yamim neighborhood in Netanya.
The Ir Yamim neighborhood in Netanya. Photo by Nimord Glickman
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Israeli housing prices have fallen during the past year, though not by much. The slight dip is the result of pressure from the top and the bottom - brought down by last summer's cost-of-living protests, on one hand, and government policy aiming to increase the supply of "affordable housing" on the other hand. But only buyers in some cities reaped the benefits of the decline. And while the government strived to alleviate the supply constraint, by freeing up land for housing development, for example, potential buyers climbed onto the fence in the hope that prices would go down. So many sellers held onto their property rather than sell at a discount; and the deal flow slowed.

What will happen with home prices this year? As we said last week, that's anybody's guess, but TheMarker did its best to provide a snapshot of forecasts in key Israeli cities. In Tel Aviv for instance, prices by and large stood firm, though the deal flow collapsed, mainly in the city center. Prices also stood firm in the Jerusalem market for high-end housing, which targets mainly foreign Jews. But the number of transactions fell by about 20% in 2011 compared with the preceding year; brokers report that it's harder to close deals. Ashdod continued to buck the trend; housing prices refused to pull back and demand has stood firm too.

This week we look at Haifa and some of the towns surrounding Tel Aviv. It is also an apposite moment to investigate how well our forecasts for 2011 panned out.

Last year our overall view was that activity in the Israeli real estate market would slow because prices had spiked to their highest level ever. We also predicted that the hardest-hit sub-section of the real estate market would be "housing for investment" - people buying apartments to own and rent out, not to live. Prices had risen so high that investment wouldn't pay, we said.

We were spot on. Our forecasts for the individual cities were also quite accurate. We expected prices in most Tel Aviv neighborhoods, including Florentin, to steady; that did happen. But we didn't foresee that prices would actually creep down a little. In Karmiel, we thought prices would stop rising; they didn't, not entirely.

And we were wrong about Jerusalem. We had thought prices would also flatten, or slightly increase in the poorer neighborhoods; in practice it couldn't be said there was a uniform trend in the city. Also, if anything prices in some of the outlying neighborhoods such as Pisgat Ze'ev and Har Homa retreated a little. We also predicted that prices in Petah Tikva's cheaper neighborhoods would be rising and got that wrong, too.

And what about the year to come? Read on.

With reporting by Arik Mirovsky, Nimrod Bousso and Nathan Sheva.

Ramat Hasharon / Prices easing at high end only

The Ramat Hasharon housing market caught the chills too, with the number of home purchases falling precipitously over the last year. House hunters insisted on paying less but sellers wouldn't budge, leading to a stalemate - with price levels remaining stable for the relatively few transactions that did go through. Local brokers now say they sense renewed buyer interest, but business has yet to pick up.

Hardly any change has been registered in the city's property values. Prices for four-room apartments, in high demand but low supply, have edged up just slightly. In the market for detached homes, however, prices have dropped about 5%.

Following years without any large-scale construction in the city, several so-called pinui-binui developments, to replace old housing projects with modern high-rises in the east-end Morasha quarter, could add thousands of housing units in the next few years; but their impact hasn't yet been felt. Meanwhile, three-room units in the area's old projects range from NIS 950,000 to NIS 1.1 million, depending on the condition of the home and expansions done to it. In newer 10 to 15 year-old buildings, such apartments have remained priced at between NIS 1.25 million and NIS 1.4 million, while four-room units go for around NIS 1.5 million.

In the Hadar and Alon quarters, bordered by Ussishkin Street to the east and the city's main drag, Sokolow Street, to the west, and characterized largely by apartment blocks, older four-room units cost about NIS 2 million while the few new ones reach NIS 2.4 million. Five-room apartments in this area range from NIS 2.5 million to NIS 3 million according to size and age of the building.

Classy detached homes dominate the Golan and Kiryat Yearim neighborhoods on the city's west side. Prices for houses built on 250 square meter lots start at NIS 4 million if massive renovations are needed, reaching NIS 5.2 million for the newest and most impressive homes. That's down from the NIS 5.5 million they would have fetched last year. Houses on 400 square meter lots are worth between NIS 6 million and NIS 7.5 million.

Prices for older houses on a half dunam in the southern Neve Magen neighborhood are around NIS 4.2 million while houses on smaller 400 square meter lots go for NIS 3.5 million to NIS 3.7 million.

Petah Tikva / New construction winding down

Until last year Petah Tikva was one of the most buzzing real estate markets, but then it fizzled due to rising prices - sending the prices down.

Prices held stable over the year in the Hadar Ganim and Ramat Verber neighborhoods. Four-room apartments in these areas are down slightly from last year's NIS 1.2 million; they're now fetching NIS 1.15 million. But prices could go back up, particularly in compounds of old buildings where demolition and rebuilding projects are being encouraged.

The Em Hamoshavot neighborhood has been drawing a solid class of residents from the Tel Aviv area and Sharon region. Prices here have declined by up to 5%. Four-room units that sold for an average of NIS 1.5 million last year have fallen to NIS 1.45 million the past few months.

A house with 280 square meters of living space on a quarter-dunam plot in Neve Oz currently sells for NIS 3.8 million, with similarly-sized plots of land going for NIS 1.7 million. Both types of properties are priced much like they were last year.

The same trend is evident in the city center, where 60 to 70 square meter two-room units are being sold in the range of NIS 700,000 to NIS 750,000 and four-room apartments are going for NIS 900,000 to NIS 1 million, basically the same as last year. In the prestigious southern Kfar Ganim Gimmel neighborhood, a shortage of four-room apartments has kept prices where they were last year - NIS 1.7 million. But a large supply of five-room units here has brought their prices down from an average of NIS 2 million last year to NIS 1.9 million.

Be'er Sheva / New tenders come up empty in sluggish market

Sluggish and hesitant, Be'er Sheva's real estate market this past year mirrored the housing market in the rest of the country. Passover 2011 marked the halt to the steadily rising prices in the city over the previous years.

Among Be'er Sheva's alphabet soup neighborhoods, the Gimmel and Dalet areas near Ben-Gurion University of the Negev, saw the end of the 50% surge in prices they had experienced during the preceding three years; last year they remained flat. Apartments here with 50 square meters now cost NIS 450,000 to NIS 500,000 - about the same as last year. The story was the same for areas in Dalet further from the university, where similarly-sized units go for NIS 280,000 to NIS 330,000.

The upscale compound undergoing development to the west of Rager Boulevard, near Soroka Medical Center and the city's new performing arts center, is also following the market trend. The price of four-room units has remained steady for the past 1.5 years, at NIS 1.1 million. Five-room apartments start at NIS 1.2 million.

Prices over the past year also have not changed in the further outlying Neve Ze'ev and Ramot neighborhoods. Four-room apartments in these sections cost NIS 820,000 to NIS 850,000.

Signs of Be'er Sheva's real estate market freeze have been apparent since October, when Israel Lands Administration tenders in the city failed to attract any bids whatsoever, due to escalated development costs and lack of available credit from banks. The tenders that went unanswered were mostly for hundreds of apartments in Ramot, and the city is left with scattered projects totaling a mere 1,000 housing units. Expectations are that price hikes could be sparked in the city by the end of the year due to limited supply of new housing.

Ra'anana / Younger generation looks toward 2015

 

A prolonged lack of new residential construction in Ra'anana has deadened its real estate market. People already living here are staying put, but young families that might have moved in are finding it tough to come up with enough money to buy a home in the affluent suburb.

While the market isn't exactly hopping even in normal times, the second half of 2011 saw a drastic reduction in the number of home sales. Only very recently has the volume begun approaching the level it was at prior to the social-justice protests.

Meanwhile, those who do live there, particularly younger residents, continue casting their eyes eagerly toward the city's north end, where Ra'anana Plan 2015 was approved early this month, after being bandied about for years. The plan calls for the building of a new neighborhood with 3,500 housing units, but though it will be three year before it is actualized.

Prices in most areas of Ra'anana have remained frozen over the past year. Centrally-located four-room apartments without balconies, in older elevator buildings, cost between NIS 1.5 million and NIS 1.6 million. Newly-built areas, like the eight-year-old northeastern neighborhood next to the Open University campus, have new four-room apartments with balconies going for NIS 1.9 million to NIS 2.0 million while five-room units are priced at NIS 300,000 more. Four-room apartments in the Lev Hapark neighborhood in the city's northwest corner range from NIS 1.5 million for smaller-sized units to NIS 1.7 million for more spacious ones.

Prices for lots in the city have also remained relatively stable throughout the year. The most expensive location is currently Ahi Dakar Street, home to a well-to-do religious Anglo population, where land is priced at NIS 10,000 to NIS 11,000 per square meter. The cost of land also runs at around NIS 10,000 per square meter in the prestigious Kiryat Ganim and Bilu neighborhoods, while lots can be found for half that price in less ritzy areas. Around Alfasi and Raban Gamliel streets or Kiryat Sharett, for example, lots are priced at NIS 6,000 per square meter.

Netanya / Awaiting a new wave of foreign residents

Netanya suffered from an abrupt downturn in housing sales this past year, which followed on the heels of a flurry of residential construction starts. Activity by the beachfront city's two main pools of demand, young middle-class families and foreign residents, have been markedly subdued.

Developers are feeling the squeeze, especially in areas where building and marketing are still in full swing - such as Ir Yamim (Sea City ), NAT-600 and the Agamim neighborhood. Prices, though, remain sticky, despite the growing surplus of new units. Builders are trying to tough it out and refrain from making big pricing compromises, in a bid to recoup high outlays on premium-priced land.

Five-room high-rise apartments in Ir Yamim, about 5% cheaper than last year, start at NIS 1.9 million, rising to NIS 2.1 million for units on the 10th floor and up that have beautiful sea views. Empty-nesters have been generating most of the demand here lately.

The trickle of deals in the Kiryat Hasharon quarter indicates prices from NIS 1.15 million to NIS 1.3 million for a four-room unit at the north end, and NIS 1.3 million to NIS 1.4 million on the pricier south side.

The general slowdown has been notably offset by a relatively large number of resales in the center of town. On streets like Smilansky and Harav Kook, several blocks from the beach, four-room apartments can be found for NIS 1 million to NIS 1.1 million. The long-established Kiryat Nordau neighborhood to the south offers a similar, or even slightly lower, price range.

Ein Ha'tchelet at the northern end of Netanya, near the sea, is another neighborhood where price levels have been maintained. Characterized by single-family homes, the area's older, veteran population is steadily being replaced by new buyers - including a large proportion of French Jews who tear down the old homes and build stately domiciles in their stead. A 650 square meter lot in the neighborhood goes for NIS 2.2 million to NIS 2.3 million.

Although the picture is generally pessimistic, foreign residents could flock back overnight if motivated by circumstances in their home countries and jump-start the market again.