What is happening in Kfar Shmaryahu? Anyone passing through this exclusive town on the coast north of Tel Aviv will run into quite a number of ‘For Sale’ and ‘For Rent’ signs. The Yad2 Internet real estate listing site is also filled with properties for sale in Kfar Shmaryahu, while the number of deals closed there is continually falling.
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From the beginning of 2014 until just before Rosh Hashanah last week, not one single-family home was sold in the community.
There are at least 10 major properties displaying ‘For Sale’ signs in Kfar Shmaryahu today - which is considered a significant number for the small community. But that is only the tip of the iceberg; real estate agents say there are another 30 properties on offer through other channels - on the Internet listings sites in Hebrew and English and by word of mouth.
“Placing signs in front of the houses is the last thing homeowners are interested in, for social and business reasons,” said an agent who works in the community. “The signs indicate that these properties have been on the market for at least a few months. At first they tried to sell them quietly, in other words by word of mouth. After that, they advertised on overseas websites and then they worked with [real estate] agents. Only afterwards, when everything else had failed, did they decide to put up the signs.”
“Kfar Shmaryahu has never had so many ‘For Sale’ signs, and the ratio between ‘For Sale’ signs and the number of residents here is very high compared to other communities,” said Yossi Mimran, the owner and CEO of Yokra Estate, which has six properties listed for sale in Kfar Shmaryahu. The present situation, in which there are no sales and lots of For Sale signs on display, is a completely new reality in the town, which is one of only three communities with the highest socioeconomic ranking score of 10 from the Central Bureau of Statistics. (The other two are Omer and Savyon.)
Kfar Shmaryahu, which officially has the status of a local council, is bordered by Herzliya, Highway 2 (the coastal road) and train tracks. It has never had a high real estate turnover - not just because it is considered one of the most expensive locations in Israel, but also because it is a small community of 1,800 residents living in some 650 households. The total area of the town is only 2,600 dunams (about 650 acres.)
Not many people can afford to buy a single family home there. But an examination of all the real estate transactions conducted in the town over the past 10 years supports the claim that something not very good is happening to the single family home market in Kfar Shmaryahu. While there were at least 20 such deals a year between 2004 and 2007, the number has dropped consistently since 2008 reaching just six in 2013. There has not been a single sale this year. So what’s happening?
The real estate agents I spoke with agree that the answer is complicated and stems from a number of processes: A jump in prices; sellers setting unrealistically high prices that are well above the capabilities of buyers; the type of properties on offer (luxury and high-quality;) and changing tastes among those looking to purchase super-exclusive properties.
“Prices have risen enormously, which means we are talking about a lot of money when it comes to expensive properties. Buyers are in no rush to pay such sums,” said Eitan Gilad of the RE/MAX agency Kfar Shmaryahu. Gilad is now selling a magnificent home on Hazorea Street, for which the owners are asking 13 million shekels ($3.52 million.) Only a few buyers have shown an interest and viewed the house, but not a single counteroffer has been made. Assumedly, potential buyers price the house at a much lower level.
Sellers are living on a different planet from buyers
Mimran tells of a property he is selling at a list price of 32 million shekels. Contact between the seller and a potential buyer from overseas has been going on for five months already. That in itself shows there are not very many people interested, but is also shows that neither party is in any hurry. Nonetheless, the foreign buyer has felt a double-edged price rise recently, said Mimran: Not only have prices in Kfar Shmaryahu risen by tens of percent, but the shekel has gained some 20% in value against both the dollar and the euro (though the dollar trend has reversed quite quickly in the past month.) While these problems exist elsewhere in the real estate market, they are particularly problematic in the luxury market, which of course includes Kfar Shmaryahu.
The large number of transactions in Kfar Shmaryahu between 2005 and 2007 was the golden age of foreigners buying Israeli real estate. In recent years, the number of foreigners buying homes in Israel has dropped steadily; today, buyers in Kfar Shmaryahuis are mostly Israelis, with different amounts to spend and a different willingness to pay the prices sellers are demanding.
Property owners are continuing to demand excessive prices for their homes. For example, an especially luxurious house on Hasadot Road was put up for sale a year ago for $20 million. The price was reduced to $18 million and then to $16 million - but still no one was interested. For the past few months, the seller has been waiting for any offer, if only to understand how much potential buyers might be willing to pay for his house.
In another case, a 600 square-meter house on a 1.4 dunam plot with a fancy swimming pool near Hakotzer Street was put on the market two months ago for $9 million; today it is going for $8 million. Mimran says he has received an offer of $7.2 million, but for now the owners are not willing to lower their price. There is no lack of similar stories.
“It creates a very large surplus of supply in the community and a big traffic jam, because sellers are not willing to compromise on market prices for their properties,” says Mimran. “Today there is a severe slowdown in the entire market, and the luxury market in particular, but there are those who look at the house David Federman sold last year as an example.”
The house Federman sold is not an example of prices in Kfar Shmaryahu. If anything it is the exception. Federman, the owner of Israel Petrochemical Enterprises and the Maccabi Tel Aviv basketball team, sold his home on Hasadot Road over a year ago to high-tech businessman Dr. Haim Amir for 55 million shekels. Not a single sale in Kfar Shmaryahu over the past decade has come even came close to that amount.
One of the town’s most prominent sales in recent years came in April 2011, when businessman Moshe (Mori) Arkin bought a home on Hazorea Street for 28 million shekels. It was half the price of the Federman-Amir deal, but the Arkin sale does not tell us much about real estate prices in Kfar Shmaryahu either.
If we examine the transactions in Kfar Shmaryahu from 2010 onward, it turns out that only three broke the 20 million shekel barrier, four were in the 15 million to 20 million shekel range, and most single family homes sold for between 5 million and 15 million shekels (some 45 transactions.) If this teaches us anything, it is that many of the sellers in the town today are living on a different planet when it comes to estimating the value of their homes.
From the village to the big city towers
The sellers of the villas (single family homes) in Kfar Shmaryahu tend to ignore the fact that many of them are not exactly in the finest shape or the height of luxury, says Gilad. “There are many old buildings in [Kfar Shmaryahu] which the potential buyers are not interested in at all. What they want to do is buy the plot, tear down the house and build something new. Therefore, in many cases the house is worth nothing, just the land,” said Gilad.
The range of real estate prices in Kfar Shmaryahu resembles that of the luxury apartment towers in Tel Aviv. One of the real estate agents I spoke to noted that tastes have changed in the luxury market since the peak period in 2004 to 2007. The big change came was the arrival of the luxury apartment towers in Tel Aviv, beginning with the Habas Group’s YOO Tower in the Park Tzameret neighborhood in 2004. One decade later, the rush from the village to the big city is in full swing - while demand for luxury homes in areas such as Herzliya Pituah, Arsuf and Kfar Shmaryahu is significantly down.
The apartment tower market has also run into trouble of late, says Mimran - and in fact the entire luxury end of the market has fallen on hard times. But there is no comparison between the Tel Aviv luxury market and the zero sales in Kfar Shmaryahu. The reason for this perseverance is that the home owners in Kfar Shmaryahu who want to sell at fantastic prices can always do so without it interfering with their moving to a new home.