The allure of Tel Aviv's eastern neighborhoods
As prices and crowding in central Tel Aviv scare buyers away, reasonable options are springing up elsewhere. Just check the leases first.
Many buyers, particularly first-timers, have been priced out of the housing market in central and northern Tel Aviv in recent years. Other real estate investors, although they can still afford those areas, are put off by the crowding and the hustle and bustle there. One increasingly popular possibility that is emerging is the city's eastern part, which offers hospitable communities and the chance at an intriguing investment at prices that are quite reasonable.
Data provided by MNA Real Estate Research indicate a clear and consistent trend of homebuyers moving from Tel Aviv's pricey areas to its more affordable eastern and southern reaches. The proportion of transactions in the former neighborhoods, though still relatively low, is steadily rising. In the first quarter of 2011, for instance, Bitzaron constituted 0.57% of all Tel Aviv home sales, whereas in the fourth quarter it accounted for 2.63%. In Yad Eliyahu the figure rose from 1.05% to 6.21% over the same period, and in Montefiore from 0.48% to 2.86%.
The Bitzaron neighborhood has been one of Tel Aviv's most open secrets for several years now. Bounded by Hashalom Road to the north and Yitzhak Sadeh Street to the south, the area has become a favored destination for young families escaping the city's costly central quarters.
The neighborhood dates back to the time when the state was founded as a place for settling new immigrants, most of whom found employment at factories located in the large adjacent industrial area, at such plants as Osem, Amcor and Ha'argaz. The modest homes there now enjoy generous building-expansion rights that will nearly double their size. Two-by-two duplexes typify the area.
"The downstairs people can expand on the ground, and those upstairs can expand to the sides and onto the roof," explains Eli Zeevi, a consultant at Rozio Real Estate, which specializes in the city's eastern neighborhoods. "This way, each unit - originally 60 square meters - can reach 100 to 120 square meters after making full use of the building rights." A pre-expansion ground-floor, 60 square-meter unit now fetches NIS 1.6 million to NIS 1.75 million.
Zeevi likens the neighborhood's ambience to that of a moshava (agricultural village ) in the heart of the city - very green and very quiet. "It attracts families," he says. "They see it as a protected enclave, suited for raising children."
Indeed, one of its draws is the David Bloch elementary-community school, which enjoys a particularly good reputation.
The diverse character of the area's population stands out, and its structures lack any uniformity in terms of the size of their units, the level of upkeep or even the colors of its facades.
Another common type of building here is the 16-unit apartment block, with two units stacked one above the other, each with its own entrance, and eight across. Apartments in these, too, originally 60 to 70 square meter in size, come with construction-expansion rights. New buildings built in the past decade are also scattered about; a five-room, 120 square-meter apartment might go now for about NIS 2.6 million.
To the east of Bitzaron lies the Ramat Yisrael neighborhood. The two areas are so similar that they would probably be considered one single neighborhood if Moshe Dayan Road, a main traffic artery, didn't separate them. But while Bitzaron was already "discovered" several years ago by young families, Ramat Yisrael is just starting to gain notice.
"The last few weeks I've been approached by a number of people looking to buy in Ramat Yisrael, and it seems as if this is going to be a turning point for the neighborhood," says Zeevi.
Despite the proximity between the two neighborhoods and their similar construction, prices go down at least several hundred thousand shekels after crossing over Moshe Dayan Road. A three-and-a-half room, 75-square-meter apartment in Ramat Yisrael, for instance, now costs about NIS 1.3 million.
Zeevi: "Ramat Yisrael is now the alternative's alternative. But both neighborhoods are on the same path and share the same future."
The external appearance of Ramat Yisrael's buildings is much more consistent than in Bitzaron. The noticeable contrast in the latter between old and new, and between renovated and neglected, changes gear here to a more uniform feel, with a differently styled building occasionally breaking the monotony.
Another difference is the much higher prevalence of detached, single-story homes. These originated as semi-detached dwellings of 60 square meters, each with the same amount of yard space. However, over the years some of the structures were combined together to create a single dwelling, and took up some of the yard space - sometimes with a second story added.
Today the value of a 70-square-meter property on Dam Hamaccabim Street that hasn't undergone expansion ranges between NIS 1.2 million and NIS 1.3 million.
South of the Yitzhak Sadeh thoroughfare is the largest of the city's eastern quarters: Yad Eliyahu. Its northern section, which stretches south to La Guardia Street and includes the immaculate Yad Labanim Boulevard, is considered the best part of the neighborhood. A 65 square-meter, three-room apartment there costs about NIS 1.2 million. The area is characterized by three- and four-story apartment blocks, with three entrances and large expanses between buildings providing plenty of open green space.
Going south, between La Guardia Street and Hahayil Boulevard, the neighborhood maintains much the same character - but at prices that are NIS 50,000 to NIS 100,000 lower. In the southernmost part of Yad Eliyahu, between Hahayil and Hahaganah Road, prices are lower still: A 90-square-meter, four-room unit can be had for NIS 950,000 to NIS 1.1 million, while a 65-square-meter, three-room apartment goes for around NIS 850,000.
Florentin of the East
Bitzaron is bordered to the west by the remnants of the industrial area that once offered its inhabitants a livelihood. Some has been taken over by commercial and office buildings like the Electra Tower and the Israeli headquarters of Check Point Software Technologies; the two residential towers comprising the Central Park project are also located here. Across the Ayalon River and its eponymous highway lies the most complex and fascinating area of eastern Tel Aviv: Montefiore. A pedestrian and bicycle bridge is slated to span the Ayalon divide, simplifying access between the two neighborhoods.
A municipal master plan approved by the Tel Aviv city council in 2009 points to a bright future for Montefiore. According to the plan, the neighborhood's southern part - from Yitzhak Sadeh Street north to Israel Bak Street - will be transformed from an area that is predominantly automotive repair shops and light industry, into a center for commerce and entertainment. To the north, the historic quarter around Yehudit Boulevard and Hanatziv Street will be preserved as a residential area, blended with entertainment and leisure facilities: eastern Tel Aviv's version of the Florentin quarter.
"These arteries will allow the development of street life activity accompanied by street-level shopping and public use, enabling a variety of events to take place throughout the day," the plan states. The light rail's red line is expected to stop close by and to provide a boost to the neighborhood's vitality.
Right now, however, reality is more chaotic. Throughout almost the entire area residential dwellings, car-repair shops and offices all stand side by side. But lively real estate activity can already be seen emerging here: Along Beit Hillel and Yosef Karo streets, uniquely designed apartment houses have been completed or are being built: One is the Karo 27/29 project by Rotem-Barkan, an eight-story building containing 48 units.
Many of the buildings in Montefiore are old and rundown so prices can vary to a large degree. In general it can be said that a two-room apartment covering 50 square meters costs about NIS 1.25 million; a three-room, 70-square-meter unit would cost about NIS 1.6 million; and a four-room, 100-square-meter one would start at around NIS 1.8 million, but could cross the NIS 2 million threshold in a new building.
Asked what will happen to the neighborhood's property prices when the light rail is in operation, Zeevi answers: "My guess is that prices in the area will jump by up to 20%."
'Examine the contract'
Optimism regarding eastern Tel Aviv, especially the Montefiore quarter, is marred by the municipality's property-leasing policy. Leaseholders of large expanses of land whose contracts expired in 2010 are waging a legal battle with the municipality over its demand that they pay 91% of the property value to be able to exercise the option of renewing their contracts for another 49 years.
Since almost all the land of the eastern neighborhoods is leased out by the city, any buyer needs to check with utmost care how long the lease on a given property will remain in force.
"The problem is that nobody knows what will happen," says Ehud Hameiri, chairman of the Ehud Hameiri & Co. real estate appraising group. "A buyer might discover that the leaseholder has hardly any rights on the property. To change the zoning to residential use, details of the lease must first be straightened out. Meanwhile, the municipality, with its policy on the subject, is delaying development."
Zeevi agrees this is a problem, but not one that should prevent buyers from doing business in the area.
"Most of the lease contracts in these neighborhoods are valid for many more years," he claims. "If there are lease contracts with the renewal date approaching, this will be reflected in the price of the property. If the period is over 40 years then it has no bearing."