for sale sign 88.
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Contrary to previous forecasts, the Jerusalem real estate market would remain relatively immune to future terror attacks, according to research conducted by Shlomie Hazam at Hebrew University.
"Should we see a rise in terror attacks on the city, prices would not be influenced by the severity of the attacks but rather the intensity [frequency] of the attacks," Hazam said. "Based on our findings, a deterioration in the security situation in Jerusalem would also have more of an affect on the rental market than on the buying price of properties."
Hazam said he was surprised at the research, which downplayed the contribution of terror on the decline in property prices over the research period between 1999 and 2003.
"By isolating and tracking terror occurrences in the city and the effects on the property market, we wanted to see how much of an influence terror was in the market," he explained.
The findings showed that areas in Jerusalem which were subject to more frequent terror with little severity, were more affected than those that had fewer but more damning attacks.
Prices in Gilo, for example, which had a high intensity of terror during the period were more affected than the city center, which had less terror but greater casualties, Hazam explained.
In the western areas of city areas such as Rassko, Katamon and Patt, largely unaffected by terror, prices were, in fact, higher in 2004 than 1999, the research noted.
Explaining the psychological impact of terror on consumer behavior, Hazam linked the short-term nature of the fear aroused by terror with consumer decisions.
"Apartment purchases are more a long-term investment decision and, therefore, prices are less influenced by any deterioration in the security situation," he said. "Fear is the main component of terror, which is more likely to be expressed in short-term behavior and, therefore, influences rentals more, which are a short-term decision."
Agreeing with this assessment, Hanan Schlesinger, managing director of real estate company Anglo-Saxon noted that particularly foreign investors, who tend to buy properties in the big centers, do not intend to live in the apartments they buy in Jerusalem so they consider terror less of a factor. He added, however, that there had been a rise in sales over the last year during a period of quiet in Jerusalem.
"We are sure that the new situation with no terror in Jerusalem has helped the market," Schlesinger said.
That trend, however, had not continued into 2006 with new apartment sales. The Central Bureau of Statistics reported Monday that new apartment sales, as a whole were down 2.8% in the first four months of the year and that Jerusalem had the biggest drop of 45% over the 2005 period. Without giving reasons for the drop, CBS said 315 new apartments were sold in Jerusalem from January to April, against the 589 last year.
For Hazam, however, it's in the city's real estate performance during the Intifada years that the market can most learn.
"In an era of uprise and ongoing terror events, authorities might want to subsidize the rental market through local taxes and should prefer subsidizing areas with many terror attacks than areas with less attacks and many casualties," the research concluded. "In addition, stability in the purchase market in years of terror might help attract outside concerned investors and initiators to the city."
Hazam will present his research at the opening of the MBA program at Haifa University on Tuesday which will focus on management in the real estate market.