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A private home on a lot of 400 square meters in one of the prestigious neighborhoods of Ashdod, close to the sea, is currently up for sale at a price of $250,000. Although this is some 25 percent lower that the usual cost of such a house, the owners have yet to find a buyer. Real estate agents in Ashdod believe that anyone willing to drive a hard bargain will be able pick up the house for even less. This is just one example of the real estate crisis that has been plaguing the city for the past three years and is now characterized by a glut of unsold apartments and a 20-30 percent fall in prices.

Ashdod is one of the cities that has been hardest hit by the slowdown in the Israeli real estate market. Estimates put the current number of unsold apartments in the city at 4,500. The unprecedented construction - intended primarily for new immigrants - in Ashdod in recent years, coupled with a drop in demand, are the principal reasons for the surplus supply and the drop in prices.

The decline in the number of people buying homes is attributed, in part, to a fall-off in purchases by Jews from France. Ashdod was once a preferred destination for this population, which bought vacation homes and made use of them in the summer. Aryeh Heller, the owner of the Heller real estate agency, says that over the past three years, the French Jews have stopped buying apartments in the city, despite the fact that here and there, a few have expressed an interest.

Ashdod was established in accordance with the national master plan that called for low-rise buildings along the coastal strip and taller structures further inland. The city, which has about 60,000 housing units, is divided into sectors that are bordered by main streets at right angles to one another. The neighborhoods were built from the north to the south. Over the years, each neighborhood developed its own commercial center, which also included educational and cultural services and a central park. This process caused an urban separation between the neighborhoods, illustrated primarily by the differences in the prices of homes in each area.

City Architect Benny Magidman notes the price gap between homes that were built in the western part of the city, near the sea, and those that were built in the eastern areas: Sections 1, 4, 11 and 15 are the most expensive; the city section and section 5 are in the city center, both geographically and from the point of view of prices; sections 2, 3, 6, 8, 9, 10 and 13 are the least expensive and there are almost no real estate transactions in these areas; and there are also differences in price within each section.

The luxury homes in Ashdod are situated along the coast in sections 1, 4, 11 and 15. Real estate agents say that there are many houses for sale, but almost no buyers. Heller says that private homes with a constructed area of 200 square meters on a 400 square meter plot are being offered at $280,000-300,000, and sometimes even less. He notes that prices have dropped by about 20 percent over the last three years, adding, however, that the past six months have seen some stabilization.

Apartments have also gone down in price accordingly. Heller says that two years ago, a new three-room, 80 square meter apartment in section 11 had sold for $117,000. Today, a similar apartment fetches only around $90,000. A second-hand, 95 square meter, three-room apartment in section 4 sold for $135 two years ago; today, the same goes for $118,000.

The Salomon construction company, which is building the Ramot Ashdod project in section 12, has been forced to offer an 8 percent discount so as to attract buyers. A 120 square meter, four-room apartment in the project is selling for $128,000, while a 128 square-meter, five-room apartment goes for $138,000. Agents note that almost all the construction companies in the city have been forced to offer discounts or perks to encourage sales.

Increased construction in the 1990s focused on two new sections - 10 and 13, in the southeastern part of the city. There are some 6,000 housing units in these neighborhoods, which are populated primarily by immigrants from the former Soviet Union. The 1990s also saw the beginning of a new neighborhood in the southwest of the city - section 12, which was considered a luxury neighborhood. There will eventually be 4,000 housing units in this area; although thus far, only about 60 percent of them have actually been built. Section 12 is intended for young couples and for families wanting to upgrade their housing situation.

Another neighborhood that was started in the 1990s is section 7, in the eastern part of the city. This section also has plans for 4,000 housing units, with all of them intended for the ultra-Orthodox sector. Magidman says that there have been no significant falls in prices or slumps in sales of apartments in this neighborhood.

Heller feels that the slowdown in Ashdod is due, in part, to the relatively low number of new immigrants, who primarily purchase three-room apartments. He also says that people who might want to buy a newer apartment in the city cannot do so because they have not yet sold the one they already own.