In nearly 10 years at the helm of the country's largest foreign-mortgage bank, David Baruch lived with his eyes closely attuned to the delicate local security situation, knowing that any change could have serious implications for his bank's primary business.

DAVID BARUCH
Photo: Courtesy

"The second intifada really brought down the market and the number of foreign buyers here dropped considerably," Baruch, who left his position as CEO of the Bank of Jerusalem earlier this month, told The Jerusalem Post on his last day on the job. "But then, on the other hand, over the last three years, the violence has mostly dropped off, and coupled with a rise of anti-Semitism around the world, we have seen an unprecedented run of foreigners buying up real estate across the city."

The Bank of Jerusalem, a "boutique" bank as Baruch calls it, has specialized for the last eight years in providing mortgage services for foreigners, building its success on a well-crafted program that aims to make foreigners, specifically American Jews, feel as comfortable banking here as they do in their home banks.

"It is really the dream of so many American Jews to be able to own a piece of property in the Holy City and the Bank of Jerusalem has helped a large percentage of them in making it a reality," he said, estimating that the bank handles approximately 40 percent of all foreign mortgages in Jerusalem. "We are more familiar to people in New York than in Herzliya and we can attribute our success to the fact that we have built our activities specifically for foreigners."

In addition to fostering an environment and creating a culture within the bank that is more familiar to Americans, Baruch said the Bank of Jerusalem team has introduced specific tools, such as offering mortgages in foreign currencies, in order to build its customer base. "Also, the people that are running the branch are all Americans - they are mostly religious Zionists, something which also helps us attract more customers," he added.

Some 22% of the bank's annual NIS 42.2 million in revenues, he noted, comes from foreign customers.

"This has really become our primary instrument in terms of fostering growth for the bank," Baruch said, noting that as of nine years ago, the bank did not have a foreign desk. "We started this business from nothing and now, we not only have a foreign desk in Jerusalem, but we have in Netanya, Ashdod and Tel Aviv, as well, and we can deal with customers in a number of languages."

While Baruch can look back on the bank's growth in the mortgage sector with pride, he noted that Avi Bazura, the new CEO, would need to keep a watchful eye on the global economic picture in addition to Israel's security situation.

"In 2008, high demand will continue to push prices in the Jerusalem real estate market higher," Baruch said. "However, American Jews, who have been purchasing apartments across the city at a very fast rate, will buy apartments at a slower clip as the effects of this year's subprime crisis set in."

"While there is no substitute for Jerusalem for Jews, as we approach 2008, we see the US economy at a crossroads as the subprime crisis is affecting the wealth of people," he said. "The market was greatly affected by this and we think that it will lead to less demand from US customers in terms of buying second or third homes in Israel as US Jews are also now faced with less buying power and are more reluctant to look overseas. Additionally, the weakness of the US dollar will lead to a slowdown of home purchases from Americans."

Overall, Baruch believes purchases from US buyers will expand but not as fast as those from the English or French.

According to the annual State Revenues Administration report for 2006, released last month, foreign residents bought 4,932 apartments last year, compared with 5,263 in 2005. After rising some 7.4% in 2006, the average price of an apartment bought by a foreign resident was NIS 1.3m. while the average among Israeli buyers was half that, or NIS 631,000. Approximately one-third of the apartments purchased by foreigners last year were in Jerusalem, with the average price coming to NIS 1.63m.

"We are talking about a limited amount of property and a huge demand on that fixed supply," Baruch said. "Jerusalem is the only place in the world that as long as there is Judaism, there will continue to be demand and this demand will continue to increase next year."