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Demand for central Tel Aviv beachfront luxury apartments continues its steady rise. Both the scarce supply of real estate and attractiveness of the city provide an explanation for prices approaching those of the world's most expensive residential
markets. Real estate expert Eyal Hartogs explains why nobody's talking about a speculative bubble.
No one moving along the Tel Aviv promenade, including the devotees of early-morning runs, can possibly ignore the everchanging urban landscape. More new buildings are sprouting up along the coast, making it seem as though there's no square meter of land not occupied by bulldozers and cranes. “In recent years, the Tel Aviv waterfront has become one of the most sought-after real estate locations in Israel, both by foreigners and by wealthy Israelis, neither of which are scarce these days,” says Eyal Hartogs, owner of Holland Real Estate, who's been active for more than 20 years
in Tel Aviv luxury properties. “The Tel Aviv waterfront was and remains a hit, with demand constantly growing and supply not always adequate.”
Just like London or New York
Hartogs attributes the sharply rising demand to the number of people who are newly rich, many of them from the high-tech field. He sees the rapid accumulation of wealth in the city as exceptional, with the desire to realize success being expressed, among other things, by the urge to acquire luxury residences in the First Hebrew City. Adding to local interest, there's the fairly steady demand of diaspora Jews, particularly from Europe, feeling insecure in their native countries and looking for a place of refuge in troubled times.
The reason all these elements focus on Tel Aviv shouldn't be surprising. “Today, Tel Aviv is included in the small number of large cities that people like to come to and enjoy themselves, just like London or New York,” says Hartogs.
“The weather, the food, the vibe, the places of entertainment, and the liberal atmosphere constitute a huge gravitational pull to the city, which has become a preferred destination for many people. They purchase premium real estate at prices that approach those of the world's most expensive property markets.”
The limited supply is one reason for the high prices. Most of the Tel Aviv beachfront is already built up, with what little that remains already earmarked for construction. Almost no land is unclaimed, necessitating a secondary option a little farther from the beach on streets near the promenade like Hayarkon, where it's still possible to find something with a sea view, plus Vitkin, Jabotinsky and other streets within walking distance to the beach.
The third level of priority includes Neve Tzedek and Rothschild Boulevard, followed by Tel Aviv's Old North. The main criteria for the various grades of priority and price is, of course, proximity to the sea. Hartogs says the property shortage is exacerbated by the fact that most potential buyers are wealthy, and don't need to sell their current homes to purchase a new residence. The fact that there's no real exchange of property acts to accentuate the shortage.
The demand is genuine and not speculative, Hartogs insists. He doesn't foresee the development of “ghost residences” found in Jerusalem, where luxury apartments are occupied only during holiday periods and remain vacant for most of the year. One of the reasons, he says, is the dispersal of foreign buyers among all of Tel Aviv's tall buildings,
unlike Jerusalem where entire rows of low buildings have been sold to foreigners.
Connecting residential towers and luxury hotels
One of the most prominent new projects along the beachfront is David Promenade Residences, exactly midway between the veteran Tel Aviv Hilton and the David Intercontinental on Herbert Samuel Street. It's an especially luxurious complex, including two 28-story towers – one of which will be residential, consisting of 50 luxury apartments, the other
housing a 250-room hotel. The entrepreneurs are NHL, owners of the David Intercontinental, the David Dead Sea, and the Grand Court in Jerusalem. Most of the residences in the complex have been sold, but a few apartments and penthouses are still available.
The residential tower/luxury hotel connection is increasingly popular around the world. Tel Aviv is now joining other
cities in the West with expertise in providing the ultimate in service to the financial elite. It's therefore appropriate that the hotel itself will be managed by the Kempinski firm, founded in 1987 and still considered one of Europe's top luxury hotel chains.
Hartogs hasn't identified any Israeli real estate “bubble,” not in Tel Aviv luxury housing which he expects to continue and not in real estate elsewhere in Israel. In the periphery, he foresees housing prices eventually declining a bit, as current price levels can't be maintained over the long run.
In the meantime, he observes a movement to the periphery by those who can't afford Tel Aviv apartments, relocating to nearby satellite cities such as Ramat Gan, Petah Tikva and Rosh Ha'ayin. It's not a matter of chance that cities in the nearby periphery, like Kiryat Gat, are developing.
Tel Aviv will continue to behave like Tel Aviv, a kind of state within a state like other major metropolitan areas around the world – even if there's a gap between them and other parts of Israel, where demand also exceeds supply.