A few months ago, Odelia and Yossi Amano of Ashkelon decided to move to a new home. The couple, who live in a five-room apartment with their five children, felt they needed a bigger place, and hoped to find it in one of the new projects in the coastal city. “We looked for a six-room apartment, and there wasn’t a big selection,” said Odelia. “We discovered that most of the new apartments had only four or five rooms.”
They mulled two options: a penthouse in the Effi Ba’ir Hayayin (Effi in the Wine City) project built by the Effi Capital real estate developer, and a single-family home in the city. In the end they chose the penthouse, with 152 square meters (1,636 square feet) of built-up space with a 108-square meter balcony, at a price of 2.4 million shekels ($775,000). “The house was about a million shekels more expensive, and it needed more upkeep,” said Odelia. “What we loved about the penthouse was that it had a big balcony that we could use for hosting guests.”
Many people looking to upgrade their homes in recent years have, like the Amano family, chosen to buy a penthouse apartment. An analysis of data from the Yad2 website reveals that during the first three quarters of 2021, the demand for penthouses climbed by tens of percent in Israel’s 30 largest cities, and as a result the prices shot up too.
As of the end of September 2021, Tel Aviv was the costliest: An average second-hand penthouse in the city cost 5.9 million shekels ($1.9 million) – a 4 percent increase over 2019, according to data from Yad2. The second most expensive location was next door in Givatayim, where the average price of a penthouse was 4.74 million shekels ($1.5 million); next was Hod Hasharon at 3.92 million shekels ($1.2 million), followed by Herzliya at 3.81 million shekels on average; and Ra’anana at 3.65 million shekels.
Between 2019 and 2021 the average price of penthouse apartments in all of Israel rose by 8 percent to 2.75 million shekels ($887,000) while the prices for “regular” apartments throughout the country rose by 4 percent to 1.79 million shekels ($577,000).
Upgraders and downsizers
Penthouse apartments are on a building’s top floor. They typically have one or two floors and a large balcony. The average penthouse apartment is 150 to 200 square meters, and sometimes it may have two separate balconies.
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The target market for penthouses consists of a few main groups: Homeowners looking for larger homes; homeowners who are downsizing – usually older adults whose children have left home and who want to move to a smaller apartment, often in the city center; and foreign residents, who buy a penthouse as both a financial investment and a foothold for when they make aliyah to Israel in the future.
“A penthouse is a property that broadcasts luxury and testifies to a certain socioeconomic status,” said Ran Ben Avraham, the deputy CEO of real estate company ZMH Hammerman. “It’s a unique product, because there are only a few like it in every building. It is larger than an apartment with the same number of rooms, and it has a much larger balcony than the standard apartments in the building.”
At the same time, a penthouse also fills certain needs, said Ben Avraham. “Some families with a lot of children need an apartment with five rooms or more, and a penthouse provides it. Often these are people who love to host, and a large balcony serves them well. They prefer a penthouse over a single-family home with a garden because they enjoy the services the building provides, and don’t need to take care of the garden.” Yoram Avisror, deputy CEO and VP-marketing at the real estate company Avisror Moshe & Sons, said the buyers of penthouses in the company’s projects are mostly homeowners who are downsizing: People aged 60 and up who are selling their single-family home in order to buy a penthouse. “The house is too big for them, the space isn’t needed and they prefer to move,” said Avisror. “They want quiet, and the penthouse is right for them because there are fewer residents on every floor. They like to have guests, and add a small kitchen, a barbecue grill and a jacuzzi on the balcony – and the balcony becomes almost another home. The penthouse is like a house in the air.”
The prices of penthouses vary greatly, depending on their size, construction standard and most of all their location. A penthouse in the northern city of Acre doesn’t cost as much as a penthouse in the Tel Aviv suburb of Holon; a penthouse in a luxury tower in the center of Tel Aviv costs much more than one in a building in the southern part of the city.
“A penthouse is a unique product that suits a specific well-off, limited audience,” said Yinon Sabag, the vice president of marketing for the Ambassador Group, which specializes in consulting and marketing for real estate companies. “These are people who want a large amount of space, and are willing to pay twice as much to get the comfort.”
The exclusivity of penthouses comes with an exclusive price. The accepted logic in the real estate market is that the larger the property, the lower the price per square meter. With penthouses, which are significantly larger than regular apartments, it doesn’t work this way – the price per square meter is higher than for a standard apartment of the same size. Even if you factor in the premium paid for being on a higher floor, a penthouse still costs significantly more per square meter compared to a non-penthouse apartment of a similar size.
Sabag provides a few examples to demonstrate the price differences. In a project Ambassador is marketing in Bat Yam, just south of Tel Aviv, a penthouse on the 23rd floor with 165 square meters of built space and a 100-square-meter balcony sold for 8.8 million shekels – 40,000 shekels per square meter. A five-room apartment in the same project, on the seventh floor, with 130 square meters and an 18-square-meter balcony, sold for 3.4 million shekels – or 24,000 shekels per square meter. In other words, the price of a penthouse is almost twice as high per square meter.
Land assessor and lawyer Nehama Bogin said penthouses have always been a desirable product with a prestigious aura. Because they are a product in demand, real estate developers leave penthouses for the final stage of sales to leverage their price. “The price rises if the penthouse has an exceptional view, such as an unobstructed view of the sea, or a large green park, and the developer will also ask for more if it is an especially high floor,” she said.
In spite of their high price, the demand for penthouses has risen since the coronavirus pandemic began. “People have switched to working from home, and want a more spacious work environment and also to be far from the street noise,” said David Malca, the marketing manager for real estate firm Maoz Daniel. “A penthouse provides this.”
Sabag agrees: “Before the COVID outbreak, we were selling the penthouses toward the end of the project, while now we see a rush for them and they are almost the first to be sold. After the COVID outbreak, a lot of people said: I want to treat myself to a large balcony, without anyone living over me. People are looking for convenience, large spaces, and are willing to compromise on location to get it. Today, it is easier for me to convince someone who is interested in a five-room apartment to add a few hundred thousand shekels and buy the penthouse,” he said.
Architects Talya Sandbank and Liron Barkai from the firm Sandbank Barkai Architects say that the planning and interior design of a penthouse is different than that of a regular apartment or single-family home. The main challenge is managing the proportions between the different parts of the apartment. “The design of a penthouse begins outside and moves inside,” they say. “It has a public space – a living room and kitchen – and very large outdoors spaces, and the challenge is to create intimacy and warmth.
“We strive to create a different experience than what you get in an apartment with a balcony. Residents who choose a penthouse over an apartment with a balcony are consciously choosing life in an urban fabric with all the benefits of a private home. It is important to them to enjoy the outside areas. Our challenge as planners is to design the outside space, so that it can be felt from every part of the inside. It is also important to create continuity from the outside to the inside, whether by flooring [without steps] that continues from the house to the outside, or with the help of gardening and plants.”
It’s all in the balcony
Because the balcony is a major part of the penthouse, the buyers put an emphasis on its design. Liron Schwartz Gilat, the vice president of design at Tollman’s, says the balcony is considered an extension of the living room. That means furnishing it with higher quality outdoor furniture, in a wide range of styles, so that it matches the overall design of the home. As part of this trend, designer carpets and lighting fixtures, which were once only found inside the home, are now migrating outside, with special materials to meet the challenges of the weather.
If the penthouses are the cherry on the top of the building, the luxury projects are the crème de la crème – and so are the prices, which can sometimes reach tens of millions of shekels. The Location 187 project by the Nitzan Group real estate company, on Geula Street in Tel Aviv, has 91 units for sale. “If the most expensive apartments are selling for 20 million shekels ($6.4 million), the price of the penthouse is 80 million shekels ($26 million),” said Shachar Mehat, one of the owners of Nitzan.
The target market for the penthouses in Nitzan’s projects is “the upper 0.1 percent. Lately, we have identified new customers – high-tech workers, managers of international businesses, owners of companies we read about in the newspaper,” said Mehat. “These are people going after their dreams. One of our clients sent a film crew to film the sunset from the balcony of the penthouse for a few hours, and only then agreed to negotiate with us.”
For much of the coronavirus pandemic so far, prospective penthouse buyers have been unable to visit the projects – either because they live outside Israel or because they were unable or unwilling to leave their homes – so the company helped them with the interior design of their apartments, down to the smallest detail including the installation of electrical appliances, said Mehat. As a result, the company concluded that customers at this level prefer to buy completely equipped and furnished apartments. For example, the penthouse at Location 187 was designed by the internationally renowned architect Pitsou Kedem.
“In an 80-million-shekel apartment, the level of finish is very high,” said Mehat. “For example, I bought a sink for this penthouse for 40,000 euros.”
The real estate company City People deals with urban renewal projects, and believes in a different approach: Instead of selling a perfectly finished penthouse, they sell it with an unfinished interior, so the buyers can design it however they like. This is what they’re doing at the Villa Melchett project in Tel Aviv, a building designated for preservation. The penthouse in the project has two floors and totals 273 square meters with two balconies totaling 127 square meters in outdoor space. The asking price is 30 million shekels ($9.7 million).
“People who buy apartments for 30 million shekels don’t want us to plan for them, because all of them have their own needs: a wine cellar, a family room, a bathroom for the children, closets or rooms for the children,” said Roni Harush, VP-marketing for City People. “We leave the penthouse with an unfinished interior: a floor, a ceiling and a bomb shelter room [mamad]. The rest of the space is not divided up into rooms, and it has only the preparations for electricity and plumbing. The [buyers] come in with their own private contractor and their architect and build everything themselves,” she said.