African rhythms blare from music shops and refugee-filled cafes have replaced sex shops in the notorious Fein-Erlinger-Salomon street triangle at the heart of Tel Aviv's Neveh Sha'anan neighborhood, adjacent to the old abandoned, decrepit central bus station. A supermarket peddling "international cuisine" - as the sign says - features foods familiar to the new residents' palate.

Just two blocks away, though, Neveh Sha'anan Street has become the center of a thriving market for investors. Property prices in the area have soared, aided by new residential construction in the vicinity.

According to local realtors and the Israel Tax Authority's website, the price for an old two-room apartment here has risen from about NIS 220,000 in 2004 to NIS 550,000 in 2009, and NIS 700,000 today. And an old three-room unit that would fetch NIS 280,000 in 2004 and NIS 600,000 in 2009 is now worth NIS 850,000. The value of a new two-room apartment on the western side of the neighborhood rose from NIS 580,000 in 2007 to NIS 1.08 million today.

Investors are attracted by high paybacks: Whereas in the rest of Tel Aviv gross returns on housing generally don't exceed 3%, here they go as high as 5% for those prepared to deal with the "marginal" groups residing in the area.

After serving as Tel Aviv's main transportation hub for over 50 years, the old station was abandoned nearly 20 years ago for the spanking new indoor terminal and mall several blocks away. Despite plans for redevelopment, the old structure remains neglected - a modernist relic of the past.

The neighborhood once dominated by the old bus station is bounded by Levinsky Street to the south, Levanda Street to the east, Harakevet Street to the north, and Chlenov Street to the west. Redevelopment initially began west of Har Tzion Boulevard, where several projects have already been completed. Construction of new projects has now begun around the area's eastern edges, near Levanda Street - mostly by buyers' groups, although foreign workers and refugees still prevail in this section. The projects have also boosted property prices closer to the old terminal.

For years the municipality has been trying to upgrade the area by fixing up its sidewalks and roads. An arts college was planned there, but nothing has materialized so far. A master plan approved in 2003 designated the Harakevet Street area for industry and the Levanda Street area for mixed use. The heart of the neighborhood, meanwhile, was defined as a transitional area where housing units (at least 50 square meters in size ) would be built.

The city says there are plans to raze and replace buildings in the Levinsky Street area east of the old bus station to attract new residents and businesses. The city also offers scholarships to college and university students who move into the Neveh Sha'anan neighborhood.

The dramatic rise in prices has come to an end, say local sources, because they are already quite steep and the neighborhood's future remains uncertain. Itzik, a local real estate agents, claims there aren't any more units going for bargain prices.

"Last year I sold a 50-square-meter apartment for NIS 620,000. Today, anyone with a 45-square-meter unit is asking over NIS 700,000 and waiting for a sucker to bite the bait," he says. "Meanwhile, they enjoy handsome returns. Anyone with an apartment that's worth anything at all thinks it is worth 10 times as much, factoring in the area's future development, according to the most optimistic scenario."

Real-estate assessor Uri Gilboa, a former property appraiser for the city, agrees that the market has cooled.

"Everything in the area is currently on hold, and the direction isn't clear," he says. "The municipality speaks about developing the area, but there's a wide gap between talk and action. I get clients asking about fixer-uppers around here and I advise them not to pay NIS 12,000 per square meter."

Among those looking to invest are middle-aged couples considering buying digs for one of their children before they marry, and then renting the place out. Clusters of Bauhaus buildings are scattered around the Rosh Pina, Levanda and Levinsky streets, and the area is undergoing renewal with the arrival of investors. Six months ago, a two-room, 70 square-meter apartment on Ein Hakore Street went for NIS 780,000.

'Musical beds'

Danny is one of the neighborhood's longtime landlords, claiming to own 20 apartments around the old station. He knows the area like the back of his hand, having grown up here in the '50s and afterward running a stall in the local market. He says it seemed natural for him to invest in housing in the neighborhood. "My first properties were empty halls that I converted into living quarters," he recalls.

Danny claims the bad rap that the area's residents get is undeserved. "The poor who used to live here were replaced by another, poor set of migrants," he says. "But they pay and don't make trouble. I give a NIS 200 to NIS 300 monthly reduction to the better tenants who pay each month like clockwork."

The apartments aren't spacious, and Danny explains that tenants are willing to put up with crowding to afford the rent. Each unit might be shared among six to eight housemates, with each paying NIS 100 to NIS 150 a month. Local brokers say a two-room apartment could have 15 people crammed inside, often with "musical bed" arrangements: different people sleeping in the same bed at different hours.

Rent collection in this area is reputed to be a specialized task for people who know how to deal with the clientele. Although admitting to using a rent collector himself, Danny insists he hasn't run into problems or found it necessary to resort to force.

Manny, in his 50s, owns two apartments here. "I bought them about six years ago from the receivers for peanuts," he says. "I rent them out, mainly to Filipinos, for NIS 3,000, which provides about a 5% return. I could get more by renting to Eritreans but I'd rather not deal with them. Filipinos maintain the property."

Manny says payment problems crop up occasionally, but adds that his tenants don't usually want trouble and risk losing their work permits.

"I had an apartment in Haifa that sat empty for months until I finally gave up and sold it," says Manny, when asked if he wouldn't be better off owning property elsewhere. "Apartments here seldom remain available for more than a month."

Moti Levy, a broker for 40 years who owns property in the area, oozes optimism. His Levy Real Estate on Yesod Hama'ala Street also employs African migrants to help manage relations with the locals. Levy says police activity has drastically curtailed crime in the area.

"This place will surpass Florentin," he predicts. "Within two or three years the number of refugees will be cut back, because it will sink in that we can't live with masses of foreigners like Europe does. There isn't any land, Florentin is too expensive, and the north [of the city] has been overrun by the moneyed classes and nonresidents."

On a neighborhood tour, he exchanges pleasantries with many refugees who request his help on various matters. Asked if he'd want his children to live here, he replies: "Why not? The refugees are quiet people who don't look for trouble."

Industrial buildings, too

Meanwhile, the old central station vicinity attracts investors patiently waiting for the municipality, at some point, to utilize the city's last remaining land reserves and develop the area.

Just a few short minutes' stroll from the concentrations of migrants, residential development is starting to take off. An estimated 250 new units have been built in the neighborhood, typically small - 50 square meters - in five-story apartment buildings, to meet the demand for suitable student housing. A fair number of lots in the vicinity are awaiting building permits, and then there are industrial buildings, some currently standing empty.

"You need to differentiate between the area of Neveh Sha'anan Street and the area where new projects are being built," says Boaz Giladi, a Reshef Real Estate franchisee. "Each section of the central station area behaves differently, according to its population. To the west of Har Tzion Boulevard, some projects have already been completed and populated with 'new blood.' The area east of Har Tzion is just gearing up now, but there are still many foreign workers and refugees, and the future here is up in the air. Mayor Ron Huldai said the city's development is headed eastward and southward, and some people sense the change."

Prices for lots here are climbing. Developer Aaron Nasi's Golden Brick real-estate company bought the 450 square-meter lot at 35 Yesod Hama'ala Street last year for NIS 7.5 million to accommodate a six-story building with 22 apartments. This price reflects a NIS 340,000 cost of land per unit - an estimated five times higher than eight years ago, but still just a fraction of minimum prices on the northern part of the city, where they start at NIS 1 million or more.

Avner Schneider, CEO of D&A Initiation and Construction, belongs to a group of partners who bought a lot in 2008 on Eiger Street. A 42-unit apartment block was later built there after being sold to a buyer's group.

"Where else can a young Tel Aviv couple or single person find a penthouse with a view of the city for NIS 1.2 million?" he asks. "The small units are earmarked for renting out at up to NIS 4,000 per month, while the larger apartments are meant to be sold."

Giladi says high-tech professionals were among the members of a buyers' group on the west side of the old bus station who are now, two or three years later, selling their units at profits upward of 25%.

"Today three-room apartments where new projects are going up are selling for NIS 1 million or more," he explains. "But the market has settled down lately. The young people will come as soon as there are offices and a college to provide jobs. What remains to be dealt with is the problem of the foreigners. The infrastructure is already much improved."

The market for office space in the area is also starting to gain momentum. Electra Real Estate and the Hagag brothers - Yitzhak and Ido - hold the rights to land at the corner of Harakevet and Bnei Brak streets, where a 23-story mixed residential, office and commercial tower will be built. Levinstein Properties spent NIS 20.2 million last year for a 5.8-dunam parcel of land (about 1.5 acres ) in the old central bus station compound. A few months ago, the municipality announced plans for a 10-story commercial center at the corner of Harakevet and Salomon streets.

"Although the area is improving, the change won't be striking until young couples or middle-class families with children start coming," sums up Gilboa. "And they won't just come out of the blue. Educational facilities are needed. The station area won't realize its potential as long as there are only developers who rent out apartments to students."