NYT: Choosing Israel, Not the Hamptons
The following excellent piece appeared in yesterday's The New York Times. (You won't see me typing a sentance like that often!) It appears online here and a slideshow is posted here.
Now because articles on the NYT website have the habit of disappearing after a few days we cut and pasted the whole thing here.
The nutshell version is that American Jews are starting to opt to buy their second homes in Israel instead of traditional US vacation spots. And, it gets better, many of those Jews eventually move here for good!
Full text follows...
March 9, 2007
Choosing Israel, Not the Hamptons
By DAVID KAUFMAN
AS an associate professor of clinical surgery and chief of high risk programs at New York-Presbyterian Hospital, Dr. Freya Schnabel is an unlikely international real estate pioneer. But as one of the first buyers in Eden Hills - a planned community 15 minutes southwest of Jerusalem - Dr. Schnabel, who is 49, is emblematic of a new breed of visitor to Israel: the foreign vacation-home buyer.
Indeed, from downtown Tel Aviv to the heart of Jerusalem, foreigners - especially Americans - searching for second homes are redefining Israel's high-end real estate market. Part of Tel Aviv is, in fact, in the midst of a mini-Manhattan makeover with the recent arrival of New York-style residential projects designed by the likes of Philippe Starck and Richard Meier. Even Donald Trump has entered the Tel Aviv marketplace with plans for a 70-story residential and commercial tower - Israel's highest - in the suburb of Ramat Gan.
Real estate analysts estimate that while foreigners made up less than 5 percent of total home buyers in Israel last year, they snapped up a third of the luxury properties - roughly defined as those priced above $500 a square foot. Taking advantage of a decrease in terrorism and property prices still far below Western levels, foreigners bought over $1.2 billion in Israeli real estate in 2006, according to the Israel Central Bank, more than double the $445 million in sales just three years earlier.
While deals like the $13 million purchase of a Tel Aviv triplex by Shari Arison, the Carnival Cruise Lines heiress, illustrate the upper end of the market, most foreign buyers are far more modest. But their desire for larger properties appears to be growing.
"The Americans have shifted from buying one- to two-bedroom to four- to five-bedroom apartments over the past half decade," said Werner M. Loval, managing director of the Jerusalem office of Anglo-Saxon Real Estate in Jerusalem, one of Israel's largest real estate agencies. "But they're still usually spending from about $400,000 to $1 million."
Davyd Tal, the Welsh-born owner of the real estate agency Jerusalem Homes, said that about 65 percent of all foreign buyers are Americans, most of whom are in their 40s and 50s. In Jerusalem, a quarter of all homes sold in 2006 went to foreigners.
Such statistics are credited with helping to boost average per-room prices throughout the capital by 27 percent last year - to just over $88,000 - even though the majority of foreigners remain concentrated in several city-center neighborhoods. These include Rehavia, the German Colony, old Katmon, Kiryat Shmuel, Mamilla and Talibeh, areas where roughly half of last year's home sales were to foreigners.
These areas are mostly within walking distance of major religious sites - the Old City, the Western Wall and the Great Synagogue - fulfilling the needs of the mostly religious Americans who are increasingly calling the neighborhoods home for at least part of the year.
"They want to be here because Jerusalem is the holy city and they are prepared to pay for this privilege," said Yaron Tzuberi, marketing and sales director for Africa Israel, one of Israel's top residential real estate developers.
Mr. Tzuberi notes that almost none of his American buyers live in Jerusalem full time, visiting instead during major Jewish holidays like Passover and Sukkot and perhaps for a few weeks each summer. Such buyers may eventually retire in Israel, but for now, he adds, "the apartments are just empty the rest of the time."
Nonetheless, along with their personal reinforced-concrete bomb shelters, Mr. Tzuberi's clients demand amenities like parking and central air-conditioning and heating - still premium services in much of Israel.
Some buyers are even opting for American-style gated communities - like the 600-unit Eden Hills - to further cushion their landing in the Levant.
"I hate sounding like an ugly American," said Dr. Allen Josephs, a 56-year-old New Jersey neurologist and future Eden Hills resident. "But I want my creature comforts while still being in Israel."
American buyers also covet the sights and sounds of Jerusalem itself. "Views of the Old City and of the Dome of the Rock are a must," Mr. Tzuberi said, "even though they can add hundreds of thousands of dollars to the cost of a home."
Properties within the walls of the Old City itself, meanwhile, are so rare that they regularly come with multimillion-dollar price tags, including one historic gem near the Western Wall that real estate agents said was shown to Madonna in 2004, though she did not buy it.
IT'S a simple case of supply and demand," says Mr. Tal of Jerusalem Homes. "When homes enter this market, they move fast."
Mr. Tal cited a $650,000 property in the Old City that sold within weeks. Another there was recently resold after just a year, with a markup of $450,000, to $1.45 million.
Views of the Mediterranean - rather than of historic sites - are among the key selling points in Tel Aviv, Israel's second-strongest market for foreign sales. Barely 90 years old, Tel Aviv's skyline is dotted with boxy, 1950s-era apartment blocks, along with an increasing number of sleek new luxury residential towers. They're a far cry from Jerusalem's low-rise, stone-clad houses.
"While Jewish, Tel Aviv buyers are almost never religious, and tend to visit far more often than their Jerusalem counterparts," said Mr. Tzuberi, adding that second-home buyers there are mostly American, British, Russian, French and ex-patriate Israelis looking for a part-time residence back home.
Spas, swimming pools, doormen and heavy security are standard offerings in Tel Aviv's newest developments, which include Mr. Starck's Yoo Tel Aviv - twin 40-floor cylinders opening later this year - and Mr. Meier's 30-story residential tower on posh Rothschild Avenue, which will open in 2010.
Such perks are expensive, however. Prime homes have risen roughly 30 percent over the last year to at least $650 a square foot at benchmark projects like the Akirov Towers - also called the Treetop Towers - in northern Tel Aviv; the 168-unit Rova Lev Ha'ir complex in the city center; and the beachfront Opera Tower. They go up to $1,000 a square foot by the sea.
Ms. Arison's $13 million downtown triplex is in Project G, a 31-floor tower still on the drawing boards.
"We were surprised by these prices, but we actually just purchased a second, larger apartment in the same building," said Margaret Amouyal, who bought into Rova Lev Ha'ir three years ago and visits Tel Aviv six times a year from Brussels.
For many foreigners in Tel Aviv, such standards increasingly include elements of the city's Bauhaus past. Known as the White City and declared a World Heritage Site by Unesco in 2003, Tel Aviv's historic core includes 4,000 Bauhaus buildings - the largest single concentration in the world - many now the target of design-minded American and European second-home seekers. Designated for conservation, Bauhaus apartments usually cover entire floors and offer the feel of a private home in a city that conspicuously lacks detached housing.
As a recent $26 million deal for five historic Tel Aviv Bauhaus buildings suggests, buying into this unique architectural heritage is not for the meek. Landmarked buildings command at least 30-percent premiums over conventional structures from the same era, according to Itzik Ben-Shoam, chief executive of White City Buildings, a real estate agency specializing in Bauhaus residences.
Whether purchasing along Israel's coast or in its spiritual heartland, one thing has been common among almost all foreign home buyers in Israel. They are generally not investment purchases.
"They're intended to be true second homes and not sold or rented for a quick profit," said the developer Alfred Akirov, whose eponymous trio of towers helped start Tel Aviv's luxury skyscraper boom in the late 1990s.
WHILE foreign sales are providing a much-needed boost to Israel's overall economy - battered earlier this decade by almost five years of bomb attacks on civilians - Israelis themselves have not necessarily been so welcoming.
Secular, middle-class Jerusalemites who can no longer afford to live in many areas of their city have been the most vocal in their anti-outsider sentiment. What's more, with foreign buyers often absent for months on end, some areas of the city can seem like luxury ghost towns.
In response, developers have broadened their marketing strategies to include local buyers, as well as voluntarily capping foreign ownership, as in a 30 percent limit at a new seafront tower in the resort city Netanya. While government-mandated restrictions remain unlikely, urban development organizations like the Futura Institute have suggested supplemental property taxes for non-Israeli owners or incentives for developers to include affordable housing aimed at local residents in luxury projects.
One firm, Nam5, is constructing a 120-unit residence offering free housing to recently discharged soldiers in a Tel Aviv suburb, as well as a new luxury tower in Tel Aviv.
For buyers like Dr. Schnabel and Dr. Josephs - who expect to move to Eden Hills by 2009 - rising prices and edged-out locals seem a world away from their still-pristine slice of ancient Judea. With homes ranging from $400,000 to well over a million, Eden Hills is priced to appeal to buyers accustomed to living among the parks, tennis courts, artificial lakes, bike trails and tree-lined pedestrian malls typical of high-end American subdivisions. Such attributes, along with numerous synagogues, are designed to lure Eden Hills's wealthy, Orthodox American target audience - and keep them there.
Dr. Schnabel is already practicing for her new, part-time life in Israel with monthlong stays in Jerusalem apartments to gain a sense of the country off the typical tourist track. And Dr. Josephs is so bullish on Israel that he has bought four separate Eden Hills lots for himself and his children.
"I am actually thinking of Eden Hills as my primary residence," Dr. Josephs said, adding that, eventually, "I will live in Israel, and then visit my second home - in New Jersey."