Sunday, 29 April 2012

Investors wary of Haifa real estate

Whither housing prices in Haifa? While it's impossible to know for sure, the learned opinion of experts on the coastal city's real estate market suspect that at the high end of the market, housing prices will hold their own or even increase in the year to come. Relatively cheaper housing however is likely to start losing ground, they think.

Housing prices in Haifa peaked during the period from April 2009 and April 2010, spiking by as much as 50% in most neighborhoods. Nor was that all: home prices continued to amble northward until April 2011, rising by as little as single digits in some neighborhoods and as much as 20% in newer housing projects such as in Ahuza and Savionei Carmel (formerly Savionei Denya ). Neveh Sha'anan (old and new ), as well as Romema.

Then came a hiatus. Calm settled over the market over the past year, particularly in areas favored by investors such as Hadar Hacarmel and Ramot Remez, which even saw a slight dip in housing prices, concurrent with the general recession in real estate investments.

Looking back further, Haifa propetry prices really started to rise in 2008. Following a decade of neglect, the city built on the sides and top of the Carmel mountain became a desirable target for investors and home owners. In recent years, areas of Haifa such as Bat Galim, long-forgotten by the real estate world, have received a significant push forward, based largely on investors from Tel Aviv. Confidence in the local market grew as home improvements in the city took off, sharply and rapidly raising prices in neighborhoods on the Carmel not usually considered investment targets.

Lately, however, there has been a sharp drop in demand for investment properties. This has two major causes. One is government taxation policy, which encourages investors to sell and deters them from any further purchases. The other reason for the fall in demand is the steep price of such properties, established during the surge. Thus, for example, a three-room apartment bought as an investment cost NIS 400,000 to NIS 450,000 in 2009, rising to NIS 550,000-NIS 650,000 by the end of 2010, with a few deals worth even NIS 700,000 recorded in 2011. By early 2012, prices gradually dropped to NIS 500,000-NIS 600,000.

On the other hand, in a new project built by Almog B.Z. Construction and Investments on Schindler Street in Savionei Carmel, five-room apartments have recently sold for NIS 2 million. This demonstrates that Haifaites are willing to pay high prices when offered impressive high-quality properties. The emerging picture is that of a slowdown or halt in price increases in the lower-end neighborhoods, with a continuing rise in the higher-end market.

Housing prices in the lower city neighborhoods are the lowest in the city. In Neveh David, one square meter is priced at NIS 4,000-NIS NIS 5,000, unchanged from last year. Prices in Hadar (Yosef-Hillel-Masada area ) reach NIS 5,000-NIS 7,000 per square meter, similar to last year, whereas properties in Neveh Sha'anan or Romema fetch NIS 9,000-NIS 10,000 per square meter, up by 10% from last year's prices. Second-hand apartments in the towers of Savionei Carmel cost NIS 12,000-NIS 15,000 per square meter, up a few percent since last year. Prices in the Ramot Golda and Almogi neighborhoods range from NIS 13,000 to NIS 15,000 per square meter, up less than 10% from last year. In the older areas on Mount Carmel, apartments go for NIS 10,000-NIS 13,000 per square meter, unchanged over the past two years. Currently the highest prices, between NIS 18,000 and NIS 24,000 per square meter (similar to last year ), are for apartments in the new projects in Ahuza.

We believe that the recent surge in the Haifa real estate market is fragile. Alongside encouraging signs are several endemic problems which have yet to be addressed.

On the positive side, City Hall has made significant and noteworthy investments in infrastructure. The new port-area campus has the potential to revive the lower city, particularly in the Palmer Gate area. Although many Haifaites and professional urban planners doubt whether the campus can revive this part of the city, investors are purchasing office space in the vicinity.

When private capital links up with public funds, things often look up. There were many objections to the construction of the Carmel tunnel. However, its completion enables easier access to many locations in the city, bypassing (although not cheaply ) the bottlenecks of central Ahuza. This has significantly eased the load on Freud and Ha'atzmaut streets. A further positive feature has been the revival of the Bat Galim area of the lower city, following its rediscovery by investors who realized its potential.

Several new projects currently underway in the city also lend optimism to the real estate scene. The most prominent project in recent years is the apartment towers being built by construction companies Isras and Gav Yam in Ramat Haviv. Also noteworthy are housing projects close to the university, built by Ashdar and Zeevi, the Mizrahi Group, Almog B.Z. and Yuval Alon. There are also much smaller prestigious projects underway in older streets on Mount Carmel, fetching prices comparable to those in Ra'anana and Givatayim.

However, long-term indicators are not promising. The Haifa area economy has been receding since the 1970s, due to the decline of the more traditional industries that were the mainstay of the city's inhabitants. The privatization of Histadrut-owned companies led to the transfer of senior company officials to central Israel, with a sharp drop in the number of Haifa-based senior managers.

The new high-tech park in the southern approaches to the city is considered a strong positive economic base for the city, but it cannot supply sufficient employment. Thousands of Technion and University of Haifa graduates, as well as many other Haifa youth, cannot find jobs in the city and drift to the center of the country. This tide has been stemmed in recent years, not due to any improvement in Haifa itself, but more likely as a result of high housing costs in the center.


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