Africa Israel's forecast: Stable prices for luxury apartments

The prices for luxury apartments in Tel Aviv will not change much in the coming years, neither up nor down. That is the forecast in the prices paid by Lev Leviev's Africa Israel for the Sumayil real estate project.

The $245,000-per-apartment price for the land in the deal takes into account that the property still does not have all the necessary planning approval. First the planning commission must clear the project, then building permits are needed. Only then can construction start.

When will that happen? According to Africa's forecast, in the middle of 2009. Others in the industry are less optimistic and expect a longer wait.

So the question is whether the price is reasonable, considering the project's unique location in the old center of North Tel Aviv. It seems to be.

An analysis of other property deals made in the last year and a half reflect high prices, some even higher than the Sumayil deal. Direct Capital bought land in the Park Tzameret project at $380,000 per unit, a deal that drew criticism because of the price - and there are other deals considered overpriced too.

All this leads one to believe that Leviev made a pretty good deal, but success depends on planning approval, removal of a family of illegal squatters, and few major changes in the luxury real estate market. Africa Israel Housing obviously feels that the luxury market in Tel Aviv now belongs to rich Israelis and not foreigners, who ruled the roost a few years ago. Africa is also betting that the demand for luxury apartments will continue to be higher than the supply, and at prices similar to now.