Sea, sand - and for-sale signs
Caesarea, known for its antiquities and exclusivity, is losing a bit of its luster as a glut of surplus land and second-hand properties is bogging down the local market. Indeed, not one plot of land was sold in the first quarter of this year.
Steeped in the aura of an ancient civilization whose remains surround it, the sprawling seaside community of Caesarea has long been a magnet for Israel's elites - Prime Minister Benjamin Netanyahu has a house here - and wealthy Jews from abroad. But something seems to have changed here in recent years, particularly in the real estate market.
A study by TheMarker shows that property values here, once indicative of the height of luxury, are no longer on a par with places like Herzliya Pituah or Kfar Shmaryahu. Land going at NIS 3,000 per square meter is certainly nothing to sniff at, but can't vie with prices in truly exclusive locales.
An excess of such available land has bogged down the market here over the past couple of years in contrast with the country's overall market, according to local real estate experts - and this has no connection to last summer's social justice protests. The huge supply is also apparent on the online yad2 classifieds board, where 100 to 150 properties in Caesarea were listed for sale at any given time throughout 2011, significant numbers considering there's a local population of just 4,900 according to the Central Bureau of Statistics. The point is driven home in the new No. 13 neighborhood near the golf course - touted during the last decade as one of the most exclusive in the country - by the many "for sale" signs now displayed there.
Data from MNA Real Estate Research show that the supply boom has outstripped demand. Between 2008 and 2011 there was a slow and steady drop in demand and in the number of property-related transactions registered in Caesarea: In the first quarter of this year not a single plot was sold.
At the center of this general trend is the mass marketing of hundreds of plots that started 10 years ago by the Caesarea Development Corporation in the so-called Golf neighborhood. Sales, slow at first, gained momentum over the years and 350 of its 384 lots have now been sold. The smallest properties - 600 square meters - are valued at about NIS 2.5 million while those covering a full dunam (1/4 acre ) are priced at NIS 4 million to NIS 10 million.
The intensive marketing campaign has sought to convince people that land in exclusive Caesarea can be had at reasonable prices. At the same time town residents were granted preferential purchasing terms and many lots were bought for investment and development purposes. As a result, within a relatively short period of time the whole locale was flooded with properties for sale, explain the town's real estate dealers.
Caesarea's administration is unique in Israel. Rather than having an elected local council, it is managed by the Caesarea Development Corporation which is jointly run by representatives of the government and the Rothschild family, under an agreement struck in the 1960s. The agreement gives the corporation a 200-year lease on the entire tract of land on which the town sits.
This arrangement has led to a clash between the interests of the profit-driven managing corporation and the residents themselves, who want to maintain their property values and the locale's exclusivity by limiting the amount of available land. Meanwhile the corporation continues its efforts to maximize land sales and generate profits for the Caesarea Edmond Benjamin de Rothschild Foundation, its parent company.
"Caesarea is a site with thousands of years of history, antiquities and an aqueduct," attests Yisrael Shor, who has 20 years of experience managing various projects and ventures there. "It sits along the Mediterranean coastline in a pastoral setting and has all the necessary qualifications for becoming an exclusive and high-quality locale. But the way the market has been run here the past few years has turned it mainly into a hub for real estate and money. There is a group of developers here who think they can name any figure they choose, and Russian buyers hovering around toting suitcases brimming with cash will give them whatever they ask. But foreign residents aren't foolish at all. Well-located and properly constructed properties will continue being sold, but anyone who built hurriedly and carelessly is now finding it very hard to sell."
Many local developers thought buying land would be a lucrative move, according to Shor, but they failed to take into account changes the market would endure. "Whoever finished building was surprised to discover, right there on the same street, two or three other houses for sale by developers who had done exactly the same," he says. "People have been complaining about the weak market now for two or three years but don't realize we brought it on ourselves."
Shor also aims some sharp criticism at the Caesarea Development Corporation, which hasn't stopped marketing land even though the market needs a breather. "Everything should have already have been stopped several years ago with a decision not to release any lots for another decade," he continues. "There are plenty of vacant lots and second-hand houses that can be razed and rebuilt. Caesarea needs a complete overhaul to restore its prestige and quality."
Real estate appraiser Yitzhak Bril, who specializes in Caesarea, also doesn't see a rosy future for the local market - at least not in the short term. The problem, as he sees it, doesn't affect the classier properties but rather the relatively more affordable homes which have been put up for sale by people trying to, as he puts it, "make a quick buck."
"The market will be volatile due to the severe financing shortage," predicts Bril. "The banks are being forced by the Bank of Israel to change their lending policy and there are fewer funds available for loans," he says, "so anyone who is a little less financially well-off, like owners of small or medium-sized businesses, is forced to sell at a substantially lower price than envisioned. I expect houses now worth NIS 5 million to NIS 6 million to decline in value by an average of 15%."
"Property owners are still asking more than the market is prepared to pay, and the volume of transactions has declined accordingly," explains Yehiel Oded, manager of the local Re/Max branch, pointing out that the number of monthly home sales in the community has dropped from around four or five last year to an average of just two or three nowadays.
Now and then buyers can get a good price by taking advantage of situations where owners are pressured to sell, he adds. A semi-detached, 260-square-meter home in neighborhood No. 7 appraised at about NIS 3 million last year, for example, was sold for just NIS 2.6 million.
"Some sellers are starting to adjust their prices to a more realistic range, but it's still not a 'bloodbath,'" says Oded.
At the Caesarea Development Corporation they counter that property values in the community wouldn't decline if it were left to them, if only because the rate of land sales and prices are under complete company control.
"We determine the sales pace - 20 to 30 lots a year," says Shailee Tresser Neuhaus, the company's marketing manager. She claims they have a clear policy for protecting the community's second-hand market.
"At the beginning of 2011, for instance, we raised the price list for plots 25%, even above assessment values, in order to support second-hand property values," says Tresser Neuhaus. "We aren't pressed to sell like the private developers are, and in periods when there aren't buyers - like in 2011, which was very weak - we don't lower prices either."
Tresser Neuhaus, however, concurs that the way many of the residents bought lots for investment in the Golf neighborhood has led to excess supply. "Many people wanted to do business, and suddenly the market was saturated and the inventory of second-hand houses grew."
Either way, it is doubtful the company's goals match the objectives of those who would prefer seeing Caesarea as a boutique community. "We are actually trying to soften Caesarea's elitist image," says Tresser Neuhaus. "There are nine kindergartens and a school operating here, and we are promoting a vibrant social environment."
But the fact that the development company is responsible to the Caesarea Rothschild Foundation for "feeding" it land-sale profits raises the question of whether it is capable of deciding on its own accord to curtail land sales if it believes that market conditions dictate such a move.
"The company's board of directors and the foundation are authorized to decide on the rate of building," responds Tresser Neuhaus.
An indication, however, that Caesarea Development Corporation is also concerned about the oversupply as can be seen in the pace at which it's promoting neighborhood No. 12, a new area planned for the south side of town. At the beginning of 2009, when the company announced its intention to begin developing the neighborhood, it was thought marketing would begin in 2010. Tresser Neuhaus now sounds much less gung-ho.
"We aren't really rushing to market with No. 12," she says. "We'll wait for the infrastructure work being done now to be completed, and then we'll start the process of branding the neighborhood. I don't expect to begin actual marketing before the end of 2013, if not early 2014."