From the ground up: The Holy City – A good investment?

March 10, 2014 23:05
2 minute read.
David’s Village complex in Jerusalem

Jerusalem housing; David’s Village complex. (photo credit: Marc Israel Sellem)


Dear Reader,
As you can imagine, more people are reading The Jerusalem Post than ever before. Nevertheless, traditional business models are no longer sustainable and high-quality publications, like ours, are being forced to look for new ways to keep going. Unlike many other news organizations, we have not put up a paywall. We want to keep our journalism open and accessible and be able to keep providing you with news and analyses from the frontlines of Israel, the Middle East and the Jewish World.

As one of our loyal readers, we ask you to be our partner.

For $5 a month you will receive access to the following:

  • A user experience almost completely free of ads
  • Access to our Premium Section
  • Content from the award-winning Jerusalem Report and our monthly magazine to learn Hebrew - Ivrit
  • A brand new ePaper featuring the daily newspaper as it appears in print in Israel

Help us grow and continue telling Israel’s story to the world.

Thank you,

Ronit Hasin-Hochman, CEO, Jerusalem Post Group
Yaakov Katz, Editor-in-Chief

UPGRADE YOUR JPOST EXPERIENCE FOR 5$ PER MONTH Show me later Don't show it again

One of the main reasons people buy an apartment in Jerusalem is the emotional factor of owning property in the “Holy City.” But this emotional reasoning doesn’t always balance with the needs and wants of someone looking for an investment property. So, is Jerusalem real estate a good investment? The answer depends mainly on the type of investment one wants. If an investor is looking for a short-term, speculative, high-return investment, Jerusalem is probably not where you want to put your money. Properties in Jerusalem increase in value over the medium to long term.

But especially in the more historical areas, these increases are constant and gradual, as opposed to the sharp price increases experienced in other parts of the country, such as Beersheba. That said, many properties have doubled their values over the last 10 years, making them good investments from a capital-growth perspective for those looking to invest in the medium to long term.

Be the first to know - Join our Facebook page.

What about rental return on investment? Because property prices in Jerusalem are already relatively high, rental return on investment is comparatively low, despite rentals being high in nominal terms. A 3 percent to 4% return is considered normal, with a return of 5% or more regarded as good. Compare this to 8%-10% in other parts of Israel, and a speculative investor can definitely get a better return by looking outside the capital.

Another type of investor common in Jerusalem is the builder/handyman who looks to buy an unrenovated apartment, fix it up and resell it. This is a good investment – provided the right property can be found at the right price. Many end-user buyers have realized that it is often cheaper to buy an unrenovated apartment and then employ a professional to renovate to their specifications, as opposed to buying a renovated apartment that still may need to be adapted to the buyer’s tastes.

In short, property in Jerusalem was, is and always will be a good investment simply because of the basic economic fact that demand exceeds supply.

Obviously, as in any market, there are highs and lows, but over a five-year time period one can expect solid capital growth while enjoying a reasonably high nominal rental return. In addition, many investors like that they own a property in Jerusalem, which they or family members may use in the future as a permanent or holiday home. In many cases, try as we might, we cannot take the emotional factor out of the equation – after all, this is Jerusalem.

Raphi Bloch is the manager of the Re/Max Vision real-estate agency in Jerusalem.

Related Content

The Teva Pharmaceutical Industries
April 30, 2015
Teva doubles down on Mylan, despite rejection