US Embassy move could push Jerusalem real-estate prices higher

Suicide bombings during the Second Intifada did scare potential foreign investors away from real estate in Jerusalem.

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December 11, 2017 07:41
3 minute read.
US Embassy move could push Jerusalem real-estate prices higher

A general view of Jerusalem shows the Dome of the Rock, located in Jerusalem's Old City on the compound known to Muslims as Noble Sanctuary and to Jews as Temple Mount December 6, 2017.. (photo credit: REUTERS)

 
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If renting or buying an apartment in Jerusalem isn’t already out of reach, the planned move of the US Embassy to the capital could push prices over the top, according to real-estate brokers.

Complicated logistics will make the move take at least two years, Secretary of State Rex Tillerson said on Friday, and former US ambassador to Israel Daniel Shapiro told The Washington Post the move could take five to 10 years, allowing a successor to Trump to change course.

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The American government is currently renting several acres of an empty lot on the edge of southern Jerusalem’s Talpiot neighborhood near Baka. While the main branch of the US Consulate General is located down the road from Mamilla Mall and the Old City, the US Consular Section compound is already located on Flusser Street in the Arnona neighborhood, next to Talpiot. In 2014, the US purchased another building adjacent to the Arnona facility.

“The Americans seem to be hitting the ground quickly,” said long-time realtor Benita Raphaely of Better Homes Israel. “Some realtors are already describing the [Talpiot] area around the American consulate as the new diplomatic suburb of Jerusalem, and they’re already trying to cash in on the new reality. If you’re talking about an embassy, the desirability of the neighborhood can only increase.”
US President Donald Trump recognizes Jerusalem as Israel's capital and announces embassy to relocate

That could cause prices to go up in the Talpiot/Arnona neighborhoods. At the same time, there has been a recent spate of new high-rise construction in the area, creating more supply.

“Jerusalem real estate will never be enough,” real-estate agent Shelly Levine of Tivuch Shelly Ltd. said. “Jerusalem is now in the spotlight. People want a piece of Jerusalem and it only encourages people to buy here.”

Whichever Jerusalem neighborhood is selected for the embassy could see property values shoot up. Nearly 1,000 staffers work at the current US Embassy location in Tel Aviv, according to a 2017 report from the State Department Office of the Inspector General, and they might clamor to live nearby.

While safety concerns could put a damper on foreign investment and scare off potential buyers, an embassy boosts overall security in the neighborhood with its constant stream of guards and surveillance.


“Look, that’s one of the big marketing points in Talpiot, ever since the consulate went there,” Raphaely said. “Ever since the American consulate opened, and I’m not talking about an embassy, there’s a lot more security in the area.”

But security is still a significant issue. Suicide bombings during the Second Intifada did scare potential foreign investors away from real estate in Jerusalem. That said, the recent spate of knife attacks in the fall of 2015, colloquially nicknamed the “Stabbing Intifada,” had little to no effect on local property values.

For foreign buyers, the relatively weak dollar – with an exchange rate of around 3.5 shekels per dollar – is affecting purchases. At the beginning of 2016, the dollar was trading for four shekels. That change could dampen high-end purchases by Diaspora Jews.

“If you want to live in the center of Jerusalem, you may be downsizing your requirements in order to cope with the exchange rate,” said Raphaely. So if you’re looking for 140 to 150 meters, you might, with your proposed budget, go down to 100, 115 meters.”

At the same time, Israel has been trying to subsidize more home-buying with its Mehir Lemishtaken “price for new residents” affordable housing program, in which the government sells state land to contractors who bid for the least expensive housing project. But that program mainly helps couples on the outskirts, in the east Jerusalem neighborhoods of Har Homa and Gilo, not in the city center.

For residents of Arnona/Talpiot, where the consulate is located and tentative plans exist for placing the embassy, concerns are more locally oriented, such as the issues of future transportation and home values.

“It’ll take a lot of logistics about traffic flow, with a lot of embassy personnel moving into the neighborhood,” said local resident Drew Tick. “And if you’re a homeowner, your property value will go up. But if you’re a renter, your rent will go up.”

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