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Monday, January 5, 2015

Why Tel Aviv’s market has grown 75% in five years

Certain countries garner column inches in inverse proportion to their size. Israel’s presence looms large, both in Middle East politics and wider scientific and cultural arenas, despite an area of just 21,000 sq km, ranked in size between El Salvador and Slovenia. Although it is in the midst of the Middle Eastern conflict, with associated security worries and international censure over the treatment of Palestinians, it is still prominent in the global property market, with the success of its domestic high-tech industry and buyers from the Jewish diaspora fuelling prime residential sales in Tel Aviv. This city’s renaissance over the past decade has brought accolades for its restaurants, nightlife and arts scene. It is also the country’s most densely populated city, with an average of 7,522 people per sq km, compared with 5,750 per sq km in the capital, Jerusalem. Tel Aviv’s prime residential market has grown 75.4 per cent in the five years to the first quarter of 2014, according to research by Knight Frank, outstripping London, Dubai, Paris and New York. The International Monetary Fund, however, suggests prices are unrealistically high, and the bubble must burst.

Founded in 1909, Tel Aviv grew rapidly under the British Mandate, reflecting the tastes of its immigrant population. A stroll through the city’s leafy boulevards today will reveal – among the high-rises – exuberant houses dating from the 1920s, embellished with art-deco elements and eastern flourishes, alongside more sober lines of the Bauhaus School, introduced by German-Jewish refugees in the 1930s. More than 4,000 buildings of this modernist architectural heritage form the basis of Tel Aviv’s White City area, recognised as a world heritage site by Unesco in 2003.

“Property from the 1920s to the late-1940s is difficult to acquire,” says Liana Slama, a property consultant who acts as finder and adviser for overseas buyers. “Most is owned by multiple heirs, or is available only to rent.” Planning and preservation orders, moreover, are stringent, falling into three categories, according to a building’s significance. Nevertheless, as part of a plan to renovate the historic centre, the government passed the Tama 38 law in 2005, incentivising developers to reinforce old buildings against earthquakes and make other improvements, in exchange for permission to add up to two-and-a-half floors to structures.

As wealthy investors express interest in Tel Aviv property, so developers have raised their game – and standards of delivery. An ambitious restoration can be seen at 96 HaYarkon, where a magnificent 1930 curvilinear house has been renovated and converted, with a nine-floor glass tower extension to the rear, to create 45 natty apartments. In contrast to the contemporary feel of downtown Tel Aviv, historic restorations are also occurring in the port of Jaffa, at the city’s southern confines. Here, RFR – a US development firm – has created W Residences. Designed by John Pawson – one of the first international “starchitects” to appear in the city – these are also the first branded residences in Tel Aviv, with full use of the facilities of the adjacent W Hotel. The project involves the conversion of the French Hospital, while Pawson’s minimalist style is softened by using wood and travertine. The 38 apartments, due for completion next summer, range from 3m shekels ($880,000) for a 450 sq metre studio, to 58m shekels ($17m) for a five-bedroom penthouse through Sotheby’s International Realty.

“The future of Tel Aviv is high-rises,” says Shai Carmel, a property lawyer who specialises in acting for foreign clients in Israel. From the windows of his offices in the trendy Neve Tzedek area, skyscrapers glitter in the sun. To the east is 1 Rothschild Boulevard, outstripped in height and price by Richard Meier’s looming new residential tower. To the north, on the “golden kilometre” of redeveloped coastline favoured by overseas buyers, are some of the most highly anticipated projects in the city: Sea One, 10 Herbert Samuel and David Promenade. In design and amenities, all compete for superlatives and shekels. For those preferring to keep their feet on the ground, however, rare houses can be found in the Old North district, or in Neve Tzedek. Gentrified over the past decade, this 19th-century Jewish settlement is highly sought-after, particularly among French and UK buyers.

“Ever since the Lehman collapse [in 2008], we’ve seen international clients increasingly invest in Tel Aviv property,” says Oren Katz, of Neve Tzedek Real Estate. There is a darker component to the Tel Aviv property boom that is often cited: concern, particularly among the large French market, of the threat of growing anti-Semitism back home. It is perhaps paradoxical that this cosmopolitan hotspot in the Middle East has come to be seen as a safe haven, both financial and social. With such multiple factors continuing to feed the market, Tel Aviv commands some of the fastest rising property values in the world. Is the situation sustainable? For the time being, at least, the bubble continues to rise above the white-hot market, impervious to any areas of concern.

Source Financial Times

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