Developers had a good year in Israel in 2007, but there has been a slowdown in the luxury home market during 2008.

With one exception – The Ultra Luxury market. Much like the super luxury market in France, which recently witnessed a record-breaking price for La Leopolda, a luxury villa on the French Riviera, the Israeli super luxury market is also seeing record prices.

The market usually sees deals worth $5-6 million or more no more than 10-15 times a year, but 2008 has already seen over 40. These properties usually involve very large apartments covering an entire floor, buildings slated for preservation, and large lots. Israelis are no longer satisfied with luxury 200-300-square meter apartments, and developers are now marketing apartments of 500-1,000 square meters or more.

There is no shortage of luxury apartments in high-rises, but buildings slated for preservation are few, and each one has its own unique character. The number of seafront penthouses is also limited. Prices of $80,000 per square meter are becoming the norm rather than the exception.

Record prices are being paid for properties with a direct line of sight to the sea, and the gap between these properties and prices for apartments on the second line and farther from the sea has widened dramatically.

Apartments on the upper floors of seafront luxury high-rises, such as Tel Aviv’s Opera Tower, are priced at $15,000 per square meter and up.

The differential between the second line and the fourth line, where it is still possible to have sea view, is eight-fold. Until recently, the difference was only two-fold, and I suspect the next median price report will show a substantial increase.

70pc of buyers of luxury homes Israelis, and 30 pc are foreign residents but, foreign residents account for at least 40pc of the purchases of seafront residences.