Conflict doesn’t hurt home prices long term, study finds

Prices recover after shooting stops in accordance with proximity to direct line of fire.

By ORI CHUDY/GLOBES
A car fire started by a Gazan rocket 311 (photo credit: REUTERS)
A car fire started by a Gazan rocket 311
(photo credit: REUTERS)
The unsettled security situation in the south caught the real estate market at a bad time: a freeze that has lasted for several months, combined with the protest movement. This reality again raised the question whether the security situation affects housing demand and prices. Since the latest clashes are too fresh to draw any conclusions, “Globes” examined previous confrontations.
Israel’s assault on the Gaza Strip, Operation Cast Lead, lasted from December 2008 through January 18, 2009. Euro Israel Development and Investment Ltd. builds homes in the south.
CEO Ofra Hadad told “Globes,” “People sold in a panic, lowering asking prices by tens of thousands of shekels, especially in Sderot and Ashkelon, because there seemed to be no solution to the situation. Buyers at that time profited later.” Hadad says that once Operation Cast Lead was over, it took time for the real estate market to recover.
Dr. Danny Ben-Shahar and Dr. Yuval Arbel of the Technion Israel Institute of Technology’s Center for Urban and Regional Studies, Dr. Yosef Toubul of the Jerusalem College of Technology, and Prof. Stuart Gabrial of UCLA’s Ziman Center for Real Estate carried out a study to see whether the security situation affects home prices.
Their findings do not support Hadad’s confidence.
The study examined the effect of firing on the southern Jerusalem neighborhood of Gilo on home prices there. Between October 2000 and April 2003, Gilo was frequently hit by fire from Beit Jala in the Palestinian Authority. Some apartments were at direct risk, while apartments that were not in the line of fire were nonetheless affected by the conditions.
The study found that prices for apartments in the direct line of fire were 8% lower than similar apartments in the neighborhood.
The study also found that home prices in the entire neighborhood, and not only for apartments in the line of fire, fell by 10%, and only recovered two years after calm was restored.
Ben-Shahar told “Globes” that, at the peak of the shooting, apartment prices fell by 17%.
“The riskier areas took longer to recover. Prices recovered 14 months after the shooting stopped.”
But Ben-Shahar believes that the results of his study are applicable, and that cities such as Beersheba, Ashkelon, and Ashdod, which take fewer hits from rockets, need less time to return to routine, including home prices. Prices in towns with more incidents, such as Sderot, need more time to recover.