Tel Aviv is sometimes touted as the Middle Eastern city that feels most American. But with so many high-rises going up in Israel’s largest city, locals say their city is slowly beginning to look like an American city as well, specifically New York. The central city is experiencing perhaps its biggest real estate construction boom since the 1930s, when European immigrants wallpapered the city with Bauhaus structures.
A shift from low-rise buildings to skyscrapers is being driven by sharply increasing prices, and real estate in Tel Aviv has been appreciating at about 15 percent a year for the last several years. The average price per square foot for apartments in Tel Aviv has reached about $740. All this high-end construction activity has left many Tel Aviv brokers scratching their heads wondering whether soaring prices reflect a rising demand, or whether these developments are inflating a big speculative bubble.
Itamar Bar, a real estate broker who monitors Tel Aviv’s housing on his blog, noted that the average price of a new apartment in central Tel Aviv is around $600,000, whereas a unit in an older building goes
for around $350,000.
The similarities go beyond the glass towers and thickening downtown populations. Doormen, ubiquitous in Manhattan, are becoming more common in Tel Aviv. So too are high-end developments featuring amenities — in-house gyms, saunas and business lounges — that have become standard ingredients of projects in New York City.
And these days, given their ubiquity, no global boomtown is seemingly complete without a little bold-faced branding by Donald Trump. Declaring that he intends to set a new standard for luxury in Israel, last month, New York’s ber builder and virtuoso of self-promotion, along with partner Crescent Heights, a Miami-based development company, dove into the local market by announcing plans to construct Trump Plaza Tower, a 70-floor mixed-use hotel and condo project that will be Israel’s tallest building. The building will be built on one of the last vacant sites left on Tel Aviv’s central waterfront.
In addition to Trump, a number of other foreign firms have large projects in development. The Los Angeles-based Nambar family is building the NAM, another high-rise tower.
Even though these projects will actually be located in Ramat Gan, on the outskirts of Tel Aviv, apartments will carry Manhattan prices. The average asking price is around $1 million. It’s a monetary threshold that regularly gets broken. According to the Israeli Appraisers Association, about 3,000 properties in Tel Aviv are presently for sale for more than $1 million.
“We want to build a tower for prestigious living, according to American standards,” said Sami Tito, the Israeli architect behind Trump Plaza Tower. “The tower will look as if it’s in the heart of Manhattan. The design will be American. So for instance, the master bedroom will be in a separate section, unlike in other Israeli-designed projects.”
Another neighborhood that’s changing quickly is Neveh Tzedek. Once a bohemian enclave of low-built pastel-colored homes, investments in cultural properties, like a new home for the well-regarded Batsheva Dance Company, have spurred gentrification. Prices here have risen from less than $150 per square foot 10 years ago to about $800 per square foot today.
Many local residents aren’t happy with the changes, and opposition is organizing, yet the city has green-lighted the construction of 13 high-rises in the area over the next few years. The biggest project calls for the creation for a mixed-use entertainment and residential development around a parcel of farmland near Neveh Tzedek formerly occupied by “spiritual” descendants of the Knights Templar, the medieval crusaders.
Overall, an increasing amount of the 20 or so luxury projects developed each year in Tel Aviv are high-rises. As many as half a dozen condo towers are rising each year. This marks a departure from a few years ago, when most of Tel Aviv’s building activity centered on five or six floor buildings or suburban-style developments.
Many, perhaps as high as 50 percent, of the buyers of these high-end apartments are diaspora Jews looking to own a house in the holy land. Except during Jewish high holidays, brokers said the majority of these apartments will be empty most of the year. They added that the future of the market will highly depend on the continued involvement of overseas investors, who account in some of the projects to up to 70 percent of the buyers.
American Jews — concentrated in New York, which has the second-largest Jewish population in the world after Israel at around 1.75 million — once accounted for the majority of overseas investors. But owing to the declining value of the dollar, the sagging housing market in the United States and a brewing credit crunch, their share is gradually declining.
Yet buyers aren’t only foreign Jews. In growing numbers, wealthy Israelis are also opting for luxury high-rise living. Recently, Sherry Arison, whose stake in Carnival Cruise Lines made her the country’s richest woman, bought a penthouse at the G Tower, a 31-story luxury building downtown, for $13 million. The most expensive price paid for a Tel Aviv apartment also rivals Manhattan prices. Earlier this year, Moshe Gindi, a prominent Israeli developer, paid $17 million for a 9,000-square-foot, three-floor apartment at the Hashoftim Tower, which is under construction.
“Until three years ago, U.S. residents accounted for 70 percent to 80 percent of the foreign market, but now their share has fallen to only 30 percent,” said Eyal Price, a real estate broker who specializes in Tel Aviv’s luxury market. “British and French investors are now playing a much bigger role as they benefit from the rise of the British pound and euro.”