jerus real estate 298 88.
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The property sector continued to polarize in 2005 with many areas in major cities becoming more expensive while housing values in the peripheries and poorer neighborhoods fell, a major industry observer said Wednesday.
Levi Itzhak, the editor of "Property Prices" magazine and the host of a show on the House Plus channel on cable, said he expects the trend to persist in 2006, as developers build for the upper-end market.
Jerusalem especially experienced a revival.
"Without doubt, 2005 was the year for Jerusalem," Itzhak said. "Foreign investors bought property and injected life into the real estate market, bringing an increase of 10% to 15% in the price of apartments."
The Jerusalem market had stagnated during the Intifada as diaspora Jews refrained from buying property in the city. However, an improvement in the security situation has attracted Jews from North America, the UK, Belgium, and France, who have spent millions of dollars on houses in Talbieh, Rehavia and the Germany Colony for investment purposes or for living in.
"Not everyone plans to live here, but everyone knows that an investment is worthwhile," said Itzhak.
Apartments in fashionable areas of the city generally cost from $280,000 to $610,000, depending on the number of rooms, but even in weaker neighborhoods such as Kiryat Hayovel, flat prices have risen 15%-25% after 10 years of declines. Apartments that cost $75,000 to $85,000 a year ago now cost $100,000-to $110,000.
Major property deals have also taken place outside of the capital, with one recent transaction in Herzliya Pituah worth more than $20m.
In Tel Aviv, there has been a rise in demand for small apartments for investment, but demand and prices have also risen for semi-luxurious apartments that cost $70,000 to $150,000 a room.
Two-room apartments in Tel Aviv cost about $180,000 to buy and $650 a month to rent, while one-room apartments cost $90-$110,000 to buy and $450-$550 to rent.
Part of the reason for the rising prices is that although there has been a lot of building in 2005, construction in Jerusalem, Gush Dan and Modi'in has not met demand, and property has been sold for $10,000 per square meter during the building process.
"Entrepreneurs buy land at high prices with the total security that they will sell the apartments," said Itzhak.
"There is no need to ask if there is demand. The entrepreneurs don't take risks. The apartments are bought soon after construction has started," he added.
However, in the peripheries, such as Kiryat Shmona in the north and Beersheba in the south, where there is high unemployment and problems with education, there is little demand and prices have dropped.
Itzhak expects that in 2006 there will be a shortage of mid-range flats, which he defined as apartments with elevators and parking but lacking other signs of luxury. This is because contractors are building luxury apartments, for which he expects continued demand but little price movement.
He also predicted sustained pressure and increased prices for semi-luxury properties, but forecast a "massive fall" in the cost of old apartments that are located in city centers, have no elevators and parking, and need renovating. In addition he doesn't expect the depressed prices in the peripheries to recover until the problems of employment, education and transport have been solved.