Six-room Homes Are Big in Israel

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An apartment building in Be'er Sheva (illustrative).Credit: Eliyahu Hershkovitz

The real estate market in Israel was in a slump most of 2014, while buyers waited to see whether former Finance Minister Yair Lapid’s zero value-added tax plan would win Knesset approval and because of last summer’s Operation Protective Edge in Gaza. However, one class of apartments – monster units with six rooms or more – showed no drop in sales.

Contrary to conventional wisdom, six-room homes have always been available in Israel, but until recently they were mainly single-family or semi-detached homes in upscale neighborhoods, or part of build-your-own-home projects. In recent years such units accounted for between 20% to 25% of all houses built in Israel, compared with just 5% in the 1970s

“Six-room homes have always been here, even when the markets were saturated, but they were bought mainly by religious or ultra-Orthodox families,” says Avi Bitan, vice president for marketing for Minrav Holdings, a residential construction company. “In recent years, however, with increasing birth rates, such apartments are being included in housing developments targeting the wider population.”

Liat Danino-Israeli, vice president for sales and marketing at Africa-Israel Investments, attributes that to changes in the socioeconomic structure and composition of households. Families are growing and standards of living have risen, buyers are attracted to their size, which makes for more flexible floor plans. Unlike smaller houses, six roomers are like a modular product that can be adapted for wide variety of needs, she says.

“Those looking for six-room apartments include secular families, many of which have expanded over the last decade from three children to four, or religious families that live all over the country rather than in strictly Orthodox neighborhoods,” she notes.

Bitan and Danino-Israeli regard six-room apartments as one of their “special product” items, a category that includes penthouses, quasi-penthouses and duplexes. Such apartments are often on higher floors, have better views, larger balconies and often include private parking places and other amenities. All of that pushes up the price relative to the extra space the apartments offer. .

“People are now realizing the enormous extra value of these larger apartments, which significantly upgrade a family’s living experience, giving tenants a higher quality of life for the longer term, even as their needs change,” says Danino-Israeli. Africa-Israel Housing’s new project in Givat Shmuel which is being developed together with the Aharoni Group will be called Savyoney Givat Shmuel, and its two 17-story towers will include several six-room apartments.

“That extra quality is expressed in being able to the luxury of having a room with a dedicated purpose such as a home office, playroom, home entertainment center or private gym. It also lets you give each child a private room, if you have more than three children,” she explains.

Strong market segment

Even last year when buyers were waiting to see whether the VAT exemption plan would be approved by the Knesset, the Madlan real estate price comparison website indicated that sales of six-room apartments remained high: 1,746 such apartments have been sold in the first 10 months of the year, almost equalling the 1,881 sold over all of 2013.

Another noteworthy but rather unsurprising point emerges from Madlan’s data: Most of the 1,164 six-room apartments purchased over the last year were bought from contractors, in contrast to 632 that were bought second-hand, a ratio of almost 2:1. This is just the opposite of the ratio for smaller apartments, due to the smaller supply of the larger apartments.

Still, even in Israel’s overheated real estate market, the target population for six-room homes is limited. Developers devote much thought and research into the matter before deciding how many giant units to include in a new development. “Contractors don’t create the demand,” says Minrav’s Bitan. “We’re building projects with apartments of this size in Hod Hashomron and in Holon, but we did had projects, such as in Rishon Letzion, where there was a much less interest in the larger apartments.”

Contractors therefore end up building two types of six roomers. One category is very large units, suitable for buyers who not only want so many rooms but also a lot of space. “In Hod Hasharon, for example, we’re building 180-square-meter apartments after identifying a demand for these by older people transitioning from detached houses to apartments who want to keep living in very roomy dwellings,” says Bitan.

The second type is designed for large families that can’t afford really a huge home, or families who plan to convert their homes from six small rooms into five spacious one. An exceptional case is a project being built by the Shechter Group in Or Akiva composed of only four-room and six-room apartments. Purchasers of the latter can opt for five large rooms instead of six smaller ones.

Why aren’t five-room apartments available to begin with? The secret, explains Shechter Group CEO Dedi Riesel lies in the right combination of space and price. Six-room, 133-square-meter apartments start at 1.25 million shekels ($312,000), while four-room apartments start at 1.059 million shekels. These prices are more like those for five-room apartments.

“Some contractors sell five-room apartments measuring only 115 square meters,” explains Riesel. “We allow purchasers to decide what type of apartment they want. Walls can be easily moved to make a larger living room if they want. After doing some research we decided that in addition to a separate parents unit, we’d build another separate unit with its own toilet and bathroom. This can serve an older child who wants privacy or as a unit for aging grandparents who the family does not want to put into a retirement home.”

Some 123 of the 267 apartments Minrav is building in Or Akiva have six rooms. This is an unusually high percentage and is based on their price, which resembles the usual price of a five-room apartment. Riesel says these apartments were snatched up, surprisingly many of them by residents of Caesarea, the upscale seaside town to the west.

“These are older people who are fed up with mowing the lawn, climbing stairs in their houses and having to maintain a detached house,” says Riesel. “Obviously, they took the upper floors in the project since they won’t give up their sea view, but we were surprised they even showed up.”

Moving to Be’er Sheva

Avisror Moshe & Sons, a building company, has identified a similar trend in the south. Older people from Be’er Sheva’s upscale suburbs, such as Omer, Meitar and Lehavim, are looking at larger apartments in the city itself as replacements for the detached homes in which they raised their families, says Yoram Avisror, vice president for marketing.

To accommodate them, the company is including five-and-a-half and six-room apartments in its Avisror Towers project under development. Lofts and mini-penthouses are also available in this upscale project. A six-room, 215-square-meter loft apartment on the towers’15th and 16th floors is selling for 2.8 million shekels.

What does the future hold? The six-room category won’t be seeing any upsets soon. Construction of larger homes has been declining since 2013. Contractors prefer to play it safe, sticking with more conventional four- and five-room units for now, and may even revert to three-room apartments. On the other hand, since the market for larger apartments is small and well-defined and there is limited supply, it may prove to be immune to falling prices, if and when they arrive, Riesel says, so contractors will keep building them.

“This market is less susceptible to the vagaries of the general market,” he says. “In addition, buyers of these apartments have reached the limit of their family’s growth and they aren’t interested in upgrading. So there’s a good chance that anyone who buys such an apartment will not be putting it back on the market anytime soon. This limits the second-hand market.”

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