I can confirm this, and Im 100% positive (no doubt in my mind at all) that everyone I ever worked with and configured this for, we always used IPs from 169.254.x.x subnet and it worked perfectly fine.
As a matter of fact, you can refer to below article referencing that.
https://supportcenter.checkpoint.com/supportcenter/portal?eventSubmit_doGoviewsolutiondetails=&solut...
BUT, this is really important...MAKE SURE that when adding routes for this, that default gateway is the actual remote VTI interface IP address, otherwise it wont work.
Ping me privately if you have issues, I have some guides for this as well. I cant share them with you, but I could show you some screenshots.