The main reason behind the increased volume is that more luxury apartments have come online in recent years, says Noam Dzialdow, CEO of the luxury realtor Neot Shiran. “Along the Tel Aviv shoreline, the market is almost always influenced by supply and not demand. In a market so small in terms of supply, everything that goes on sale is sold,” he says. Traditionally, the number of new developments that can be built has been constrained. The general public - the ones who don’t aspire to a seaside penthouse but simply a day at the beach - fight to ensure access and unobstructed views. Most of the original construction on streets closest to the beach are low-rise buildings, built on small parcels of land. Developers typically have to buy out multiple property owners to amass enough land to build a new project, a process that can take so many years that the building never gets off the ground.
This has meant that, for many years, no more than one new luxury development was under construction in the area in any given year. However, right now two large luxury apartment projects are being marketed almost simultaneously. The first, at 10 Herbert Samuel Street, is being developed by Ofer Brothers. Recently, the developers sold the project’s last apartments, and owners will be able to move in within another 18 months. The second project is David Promenade Residences, which is still in the early stages of construction but has already sold half its units. Along with these two projects, there is Sea One, a project being developed by Electra Real Estate and Oranim Projects. Its last apartments were sold around the same time, and its first residents took possession of their properties about two months ago.
In the past three years, 70 transactions were completed in the three buildings - accounting for at least twice as many apartments, as buyers often bought two, sometimes even three, apartments on the same floor. There has not been just an increase in the number of transactions, but also in the price per square meter. Today, the prices for properties in this area range between NIS 90,000 and NIS 100,000 a square meter in the newest developments, and between NIS 40,000-70,000 a square meter in the older ones - like Opera Tower, the Park Plaza Orchid Tel Aviv, or the Sea Pearl Tower. This is borne out, for example, just by the figures from the sale of apartments at 10 Herbert Samuel. In the first half of this year, apartments were sold at an average price of NIS 106,000 a square meter (that's USD 30,000 per square meter), up from NIS 85,000 in 2012 and NIS 82,000 in 2011. Similarly, at David Promenade Residences, prices averaged NIS 106,000 a square meter last year, up from NIS 57,000 in 2010.
However, this drastic jump should be qualified by pointing out that a considerable part was due to how large projects are marketed. The closer to the move-in date, the higher their prices go. Typically, developers sell their most valuable apartments in the later stages of the project. When people speak of a slump in the luxury apartment market due to the global economic slowdown, it should be noted that this does not apply to Tel Aviv's golden kilometer. “When the entire market is in a slowdown, one can say that the shoreline is in bloom,” says Dzialdow, whose agency is marketing the apartments at the David Promenade Residences. Today, if you want an apartment in one of the luxury towers on the shoreline, it won't be for less than NIS 100,000 a square meter - which means a smallish 100-square-meter apartment will cost you close to NIS 10 million, Dzialdow says. With prices like that, most of the buyers are foreigners, with Israelis constituting only 15% to 20%, he adds.
For those at the very top of the income heap who still find NIS 100,000 a square meter unreasonable, there is an option of looking further afield than Herbert Samuel Street and the shoreline, to the second line of buildings on Hayarkon Street. It’s a short distance, but you will find drastically lower prices of between NIS 40,000 and NIS 60,000 a square meter, depending on the floor and design of the development. An example is the Faire Fund's Hayarkon 96 development, where an 83-square-meter, two-bedroom apartment was recently sold for NIS 3.9 million. There is also 29-31 Hayarkon Street, which is being developed by Rotem Shani and the Hagshama Fund, where a similar apartment sold for NIS 5.5 million. According to Hagshama Fund CEO Hanan Shemesh, the second line of buildings on Hayarkon Street are also enjoying strong demand. As proof, he offers figures which show that, just a short time after his building’s sales campaign began, the developers have sold 10 apartments - half of the apartments they own (some were retained by the original property owner in return for building rights).
Shemesh says the strong demand has reduced the risk to developers in the area, despite high land prices. “We brought NIS 18 million to the project, and the fact that we have 10 completed sales at this stage lets us sleep tight knowing that the return we promised investors will be achieved,” says Shemesh. He adds that Hagshama is in negotiations to sign financing agreements for two more developments on Hayarkon because of its attractiveness as an investment. Shemesh says one thing differentiating the projects on Hayarkon from those right on the shoreline is the more complicated design needed to give buyers the feeling they are right on the beach, even when they are not. In Shemesh's case he is speaking from bitter experience. His project's view of the sea is partially obstructed by another building located to the northwest. “With considerable planning effort, we succeeded in ensuring that the tower can’t be seen from even one of the apartments,” he says proudly.
Source Haaretz
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