Markets worldwide experience highs and lows, responding to economic trends , political unrest or the “bubble syndrome”. So how is it that the Jerusalem real estate markets keeps rising year after year? The government has implemented many measures to try to bring down housing prices in the country ,and in some cities these have succeeded. Shortening bureaucratic the red tape and releasing more land to developers over the last few years has definitely increased new construction. In 2013 there were 3,400 new apartments under construction.
The Jerusalem Regional Planning Committee granted 2,660 new building permits, and the Israel Land Authority released plots for hundreds of additional housing units, mainly in the Pisgat Ze’ev, Har Homa, Ramot, Ramat Shlomo and Pisgat Zeev neighborhoods.
Unfortunately for the residents of Jerusalem , even this level of new construction is not keeping up with the demand. The Ultra orthodox population has increased from 44% to 52% of the total population in Jerusalem over the last 5 years, while the secular to moderately religious population has dropped from 56% to 48% over that same period. The high demand for properties in religious neighborhoods cause prices to increase in those areas due to the limited supply of properties to purchase. Many investors see this trend and therefor try to purchase properties in neighborhoods that are still “mixed populations” and have not become totally Haredi. According to Alyssa Friedland, Broker/Owner of RE/MAX Vision , with 25 agents covering almost every neighborhood in Jerusalem, ” the savvy investors are finding the bargains in neighborhoods such as French Hill , Arnona, Kiryat Yovel and Armon Hanatziv. These neighborhoods border areas that have already seen a sizable increase in prices. Many are close to areas that have recently become dominated by ultra orthodox populations, such as Ramat Eshkol versus French Hill, Ramot and Ramat Shlomo, Kiryat Yovel and Bayit V’gan. Prices in the lower/ non haredi neighborhood can be as much as 15-25% lower than the neighborhood that has become religious. ”
This phenomenon combined with low interest rates keeps the Jerusalem market bubbling. Even young couples, who were sitting on the fence after the social protests a few years ago, are realizing that there are “affordable pockets” in the market worth exploring, even on a tight budget. Many first time buyers also have other government incentives and mortgage advantages , and are therefor getting back into the purchase market and out of the rental market. Although foreign buyers are usually limited to 50% financing, Israelis and young couples can get as much as 70% financing from the banks. The prime lending rate is at an all time low, and even though banks are only allowed to offer 1/3 of the mortgage linked to the prime rate, this can be the difference between an “affordable ” mortgage and one that creates strain for a young family.
Many of the older buildings in Jerusalem are going through the renewal process of either “Pnui Binui” or “Tama 38”. For the last few years the permits given for this rehabilitation and renewal have been few and far between, however in the last year, the regulations have been eased and many more permits have been granted. Areas such as Katamonin, South Baka, North Talpiot, Kiryat Yovel and some areas of Arnona have already seen the benefits of this project . The buildings that undergo the renewal become fortified for earthquake , receive elevators, secure ( mamad) rooms, and sometimes additional rooms and even balconies. The facade of the building is also refaced with Jerusalem stone if it was originally a stucco facade. Other improvements can be negotiated between the owners and the developer who is responsible for the project. For the homeowner, this renewal can appreciate their property anywhere from 20%-30% once the project has been completed. Many investors or even foreign buyers have expressed interest in purchasing properties from sellers who dont want to wait for the process or who dont want the inconvenience, and are willing to sell prior to the implementation of the project. The investor usually has the time to wait in order to realize these profits and can rent the property in the meantime and generate a 3-4% ROI until realizing the greater appreciation in value.
As for high end luxury end of the Jerusalem market, the majority of buyers coming from abroad are staying in the 4-6 mil shekel range. A recent sale through RE/MAX Vision was a Yamin Moshe property , approx 130 sqmt, needing total renovation, that sold for 4,400,000 nis. The foreign buyer was looking for something special with a view to the Old City and thsi suited both his needs and his budget. The seller received a very fair price of over 33,000 nis per sqmt which is as high of some of the newer construction in Baka and Old Katamon.
Another recent phenomenon in Jerusalem is the influx of European buyers who are buying smaller properties in the 2-3 million shekel range, as a haven from the current storm of anti-Semitism spreading throughout Europe. The fear of Muslim extremists, ISIS and perpetuation of hate crimes against Jews are just a few of the reasons these European Jews have staring looking for a haven in Israel.
While many of the secular European buyers prefer Tel Aviv and Netanya for the proximity to the ocean, the more traditional and religious buyers prefer to purchase in Jerusalem. The spirituality and emotional connections play a strong role in their decision to buy in Jerusalem.
A recent purchase of a small 2 bedroom property was made by an older couple from Paris. The RE/MAX Vision agent Raphi Bloch said “The buyer saw the property only once on a short visit to Jerusalem . He went back to Paris and later called to make the offer. The entire transaction was done without him even coming back to Israel. His attorney had a power of attorney to execute the transaction, and funds were transferred by wire. The agent even found tenant to occupy the property for the next few years until the owner decides to come and use it. The property was purchased for under 2,.000.000 nis .
In the unpredictable and unsettling word we live in today , Jews worldwide are realizing more and more that the safest and most secure “home” they will ever have will be a haven in the State of Israel.