Jerusalem is a city of contrasts and contradictions.
By JOHN BENZAQUENPredictions for Jerusalem in 2014 see a strong and active market for buyers and sellers(photo credit: ARI MARRACHE)
In the last week of February, chief government appraiser Tal Eldorati published figures on real estate prices for the last quarter of 2013 and for the year as a whole.The price of an average four-room apartment at the end of 2013 was NIS 1.76 million – unchanged from the average price at the end of the third quarter of 2013 and a rise of only 1 percent compared to the end of 2012.However, averages have to be considered in perspective, since they can hide significant fluctuations at the poles of the spectrum. The realestate market in Jerusalem is a case in point. A city of contrasts and contradictions, the capital caters to both the low-income segment and the high-end luxury home buyer. This is true of any large city, but it is especially true of Jerusalem, which has a large but often poor haredi (ultra-Orthodox) community as well as a relatively large influx of rich overseas buyers who are ready to throw millions of dollars into a penthouse or a single-family home.From three-room apartments that sell for NIS 11,000 per square meter in the Katamon area, to apartments selling for NIS 85,000 per sq.m. in the expensive “golden triangle” with the King David Hotel at its epicenter, to luxurious, state-of-the-art homes for NIS 50,000 per sq.m. on the German Colony’s trendy Emek Refaim Street, the Jerusalem real-estate market is as confusing and diverse as the populations that inhabit the city. The RE/MAX Vision real-estate office in Baka reported record sales last month, ranging from small investment opportunities selling for NIS 12,000- NIS 15,000 per sq.m. in French Hill, Kiryat Hayovel and East Talpiot, to a luxurious, fully furnished, 140- sq.m. “smart home” that sold for $2.1m. ($15,000 per sq.m.) to a British vacation-home buyer.The contracts are astounding and definitely distinguish themselves from any other city in the country, states RE/MAX owner Alyssa Friedland. With 26 agents in her Baka office, and herself connected to over 100 RE/MAX offices throughout Israel, Friedland certainly has a finger on the pulse of the national real estate market, and specifically that of Jerusalem.IN 2013, price rises softened after a continual surge over the last eight years – an average rise of only 1% in Jerusalem compared to an average rise of nearly 5% in the country as a whole. What is really affecting the Jerusalem housing market, and why is it so different from the rest of the country? For the previous eight years, Jerusalem was cited as one of the world’s hottest markets, with prices rising over 67% since May 2007, and 12% since August 2010.Do the 2013 figures indicate a balloon that is deflating, or do they indicate that Jerusalem has a unique attraction to a worldwide market and does not react to local economic fluctuations? According to Friedland, “the end of 2012 and the start of 2013 saw a slowdown in the number of buyers in the Jerusalem market, but by February, the market started to wake up and proved that buyers had no hesitations, as they had over the summer months back in 2011.Though the social housing protests a few summers ago did have some effect on many of the cities throughout the country, in Jerusalem the effect was minimal.”Many foreigners, as well as local Jerusalem buyers, hesitated and sat on the fence for a few months following the demonstrations, but they eventually realized that the expected price reductions were not affecting Jerusalem, and they began purchasing again by November 2011, continuing well into the following year. Although the busiest season in Jerusalem traditionally starts around Passover, with foreign buyers looking for vacation homes, we are seeing a strong trend from the local buyers upgrading and moving into larger homes. Attractive mortgage rates could be a strong factor in this increased movement in the market.The economic slowdown in Israel prompted the Bank of Israel to lower interest rates three times in the last six months in an attempt to stimulate the economy. This has had a positive effect on the purchasing power of the Israeli home-buyer.”FRIEDLAND FURTHER added that the Jerusalem market is also affected by the political and security situation in the country, and foreign buyers, who make up over 30% of the transactions in the city, tend to hold off on purchasing second homes in the capital when the security situation is tense. With a relatively stable political and security situation today, there are more foreign buyers looking for homes.”Foreign buyers in Jerusalem are usually religious,approaching retirement age, with a budgets ranging from $700,000 to $2 million. Nationalities vary – American, Canadian, British, Australian and Russian. Since they tend to use the property only a few months a year, many purchasers use short-term management companies to rent out their properties and offset mortgages and maintenance costs while they are not using the property. These short-term rentals can generate returns of anywhere from 6%-10% annually depending on the location and desirability of the property.The 2013 figures tend to suggest that real-estate prices in Jerusalem are stabilizing, at least for now. Despite the 2013 figures, experienced investors are still finding bargains in outlying neighborhoods and some of the under-priced neighborhoods that still have appreciation potential.The Jerusalem market today is vibrant and active, with properties catering to a diverse and wide variety of buyers and budgets. Predictions for Jerusalem in 2014 see slight fluctuations in price, depending upon the neighborhood, but a strong and active market for both buyers and sellers.
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