This year was shaping up to be a good one for prospective first-time home buyers in Haifa. In late January, the Israel Lands Administration awarded tenders for the purchase of land on the city’s southern outskirts for the construction of 1,200 apartments. The hope was that, for the first time in several years, hundreds of new homes would be available in the city at prices below NIS 1 million. But in practice, prices have continued to rise beyond the reach of young couples.
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Nearly all the government land tenders in Haifa for developers was earmarked by then-Housing and Construction Minister Ariel Atias for sale at a discount: The minimum price was reduced from 50% of assessed value to 35%. The intention was to flood the market with cheap land in order to reduce the price of the apartments built on them. And indeed, the winning bids for many of the tenders were only slightly above the new minimum. Israel’s financial press mostly welcomed the results, with headlines heralding the homes that would be built in Haifa and sold for less than NIS 1 million.
More than six months later, it’s mainly the developers who are celebrating. While they may have paid rock-bottom prices for the land, the prices of the apartments they plan to build on it start at NIS 1.25 million for three bedrooms and NIS 1.45 million for four bedrooms.
Despite the rising prices, however, developers say sales have picked up. One reason may be the shortage of new residential construction in Haifa.
When new apartments are built, it’s usually on Mount Carmel, and usually for around NIS 2 million. That seems to be the right price point for the buyers in this area. They are usually either current homeowners looking for a better address or more luxe accommodations or people interested in investment properties.
The new, still-unbuilt neighborhood doesn’t have an official name, but locals have taken to calling it Haifa South. There’s already a landmark nearby - Sammy Ofer Stadium, which is nearly finished and is expected to be operational by the end of the year. It’s also close to the Matam science park, the home of many high-tech companies. The neighborhood is a five-minute drive from the beach and has quick, easy access to Highway 2, the main coastal road linking Haifa to central Israel.
The first builder in the new area, Almog C.D.A.I, began marketing its apartments to buyers six weeks ago, and the results were impressive. The developer planned to sell 100 of the 300 apartments it is set to build by the end of June and get them under contract before construction is completed, in what is known as a pre-sale. All 100 were under contract in just 10 days.
In response, Almog put up the remaining 200 unfinished apartments for sale, and began raising prices. A 3-bedroom apartment that may have gone for NIS 975,000 at the start of the pre-sale phase were being offered for NIS 1.2 million by the end. Six weeks after starting sales, 270 out of Almog’s 300 apartments were under contract.
Yossi Avrahami Civil Engineering Works is the new neighborhood’s other major developer. It reportedly sold within one week 83 of the 360 apartments it plans to build in the area.
Even before the land tender, we knew there would be huge demand, primarily from young couples,” Almog Managing Director Yaki Amsalem says. “But there’s still a big question mark for builders: Can we convince Haifans that living below [the mountain] is good, and even better than living on top [of the mountain]?”
Amsalem says he’s not surprised by the prices. “Everyone who bid on the tender determined their offers for the land based on an estimated value of the apartments,” he explains. “Based on our calculations the average price was supposed to be NIS 1.18 million for a 3-bedroom apartment and NIS 1.38 million for four bedrooms. From that we got to NIS 175,000 to NIS 180,000 on average for the land for each apartment.”
Amsalem says the headlines proclaiming apartments for less than NIS 1 million were a result of ignorance about the planning and zoning process: People assumed that because 20% of the apartments were to be smaller than 96 square meters, they would cost less than NIS 1 million.
Some Haifa real estate professionals see the new neighborhood as a missed opportunity. “The state missed out here,” says Dror Aloni, branch manager of Anglo-Saxon realty in Haifa. “The goal was to lower prices, to keep young couples in Haifa and offer affordable prices.”
He estimates that 60% to 70% of the apartments purchased in the new neighborhood were bought as investments. “Instead of a neighborhood for young couples, we get a neighborhood where the prices are high and most of the apartments will be rented out,” Aloni says.
The ILA has admitted that things haven’t turned out as planned, and not only in Haifa. In its annual review, issued this week, ILA chairman Bentzi Lieberman acknowledged that lower land prices had not reduced housing prices. “The agency ... succeeded in reducing land prices, particularly in high-demand areas, but this was not translated into lower home prices,” he wrote in the report.
Speaking to TheMarker, Lieberman elaborated: "This [Haifa] tender and others prove that the existing method cannot regulate the final prices for buyers.” He added that setting final price targets was the only way to ensure lower prices for buyers.
Lieberman's comments came as TheMarker reported, earlier this week, that the Housing and Construction Ministry and the ILA are considering doing just that for thousands of new apartments that will be built and sold over the next year.
“The bottom line is that the development is good for the city, but unfortunately it won't keep young couples in Haifa,” says Aloni.