Jerusalem Real Estate Market

   One of the most unique aspects of the Jerusalem real estate market is it’s constant influx of foreign buyers purchasing both standard and luxury apartments and houses within the city. Rather than having to deal with booking numerous hotel rooms for their family, they find the convenience of their own Jerusalem residence outweighs the upfront investment made.  Such foreign purchases are generally made by North American and European buyers in some of the most sought after neighborhoods, including, the City Center, Rechavia, Old City, and Talbiya. This phenomenon is explained by the desire by many Jews to have a foundation in Israel that they can easily use on their trips to the Holy Land. These trips, which usually center around the major Jewish holidays as well as the summer months are when many of these properties are occupied. Because of this, for a large part of the year, these apartments and houses are unoccupied, hence explaining the term coined to describe them – “ghost properties.” (An estimation by the mayor of Jerusalem as to the number of such “ghost properties” is as much as 11,000 – note that linked article is in Hebrew.)

   There have been, and continue to be, concerns voiced claiming that these buying patterns, and subsequent creation of “ghost properties” lead to a shortage of homes as well as  steep increases in Jerusalem real estate prices for full time Jerusalem residents. In return, others respond that these foreign buyers are advantageous since much needed investment and infusion of capital due to these sales acts as an energizing and revitalizing force for the Jerusalem and larger Israeli economies. The AI-Monitor did a lengthy write up where it included various perspectives, including those of a foreign buyer of a luxury home as well as a full time resident who believes that such purchases are detrimental to full time Jerusalem residents.

   In response to the concerns mentioned, there have been initiatives to assist in putting these properties to use for the substantial parts of the year when they would otherwise be left empty. What started as slight pushes by the Jerusalem mayor, Nir Barkat, which included advertising campaigns, eventually evolved into approval of a bill mandating a double tax regime levied on owners of such “ghost apartments.” Even those who agree that these “ghost apartments” present a very real issue with adverse affects on Jerusalem residents are generally in agreement that such double tax will not fix the issue. The rationale is that these apartments are often times filled with personal belongings and other expensive property. Increasing tax, while certainly not welcome to foreign owners, will arguably not make them rent their properties to young families and students, whom are the target population that the Jerusalem municipality is trying to help. In positive sign for those concerned with foreign buyers, Haaretz reports: “Nevertheless, these numbers are trending downward. Over the last two years the number of home purchases by foreigners has dropped – by 19% in 2014 and 15% in 2013.” At the same time, wealthy foreign buyers are seemingly being replaced by wealthy Israeli buyers. So are we back at square one with concerns of young residents with limited means being boxed out of the market?

   While sticking with the same topic of foreign owned properties, it is interesting to bring into the discussion the explosive growth of Airbnb rentals throughout Jerusalem. In contrast to the idea of renting out their apartments to Jerusalem residents, foreign owners are increasingly warming up to the idea of cashing in on the premiums they can demand from tourists to the holy city. By undercutting Jerusalem hotels, which often charge upwards of $200 a night for a standard room, foreign owners market their homes as a far better option. Instead of getting a small, single room, visitors to Jerusalem can get an entire home for a cheaper price. And somewhat unsurprisingly, tourists across the world, not just in Jerusalem have been in agreement with this argument. That is not to say that Jerusalem hotels, especially with the addition of some top of line brands, including The Waldorf Astoria, do not have their clear selling points. Rather, Airbnb in Jerusalem is becoming a viable option in competition with the traditional hotel. At the same time, while more foreign owned apartments may now be occupied by short term stays, this surely does not solve the issue of full time Jerusalem residents, particularly the most budget conscious such as new families and students.

   We now come full circle on the exciting Jerusalem market after this roundabout discussion of one of the most contentious debates, by looking at one of the biggest relatively recent deals in the city. We start with the sale of a $7.4 million (29 million shekels) property in the German Colony neighborhood, near the old railway station. In addition, while somewhat of an older deal, the Waldorf apartments, adjacent to the hotel; four of which were sold to Jay Schottestein for close to $29 million (110 million shekels). If that doesn’t say mega deal then what does…