Real estate is a risky business. So the omnipresent "they" say. Currently, however, the Jerusalem real estate market is putting this axiom to the test as property prices and the city skyline are reaching unprecedented new heights. Development is booming as new high-rise complexes are planned for downtown and the surrounding areas. And the trend shows no sign of slowing down, with values that have increased from between 30 to 300 percent. After falling precipitously during the intifada, real estate is back on track, as real estate agents and developers are racing each other to attract the pocketbooks of eager overseas buyers. The Jerusalem real estate market is turning out to be a relatively fail-safe option. And conventional wisdom posits that as long as the city remains the archeological and spiritual home to the world's three leading religions, its properties - especially those within walking and viewing distance of the Old City - will always be in demand. Yet although this growth is likely to infuse some short-term sorely needed capital into Jerusalem's increasingly poor infrastructures, its long-term sustainability and benefit to the city's economy are questionable. The city's hot spots include such prominent neighborhoods as Talbiyeh, Rehavia, the German Colony, Baka, Katamon and Abu Tor where prices have risen from an average of $3,000 to $4,500 per square meter in 2001-2002 to upwards of $5,000-$12,000 per square meter today. Real estate agent and developer Isaac Levy predicts these prices will spiral even farther upwards as larger and more luxurious projects hit the market in the next few years. "I have a few apartments that are starting at $20,000 [per sq.m.]. Although we are not there yet, I do regularly hear about apartments for sale starting at $15,000 [per sq.m.]" Levy said. Some of these million-dollar-plus apartments are part of the new high-rise development projects being constructed near Jerusalem's most posh landmarks. They include locations next to the King David Hotel, Independence Park, the David Citadel and the already exclusive David's Village. Taking into account similar developments slated for the center of town, there will be almost 600 new apartment units available for the upscale consumer in the next few years. At least four of these developments will include high-rises reaching 22 floors. Such skyline altering developments and luxurious homes are not limited to new developments. Houses and apartments in the more traditional neighborhoods are also undergoing landscape-transforming renovations to meet the demands of their new owners. According to city planning experts, the municipality is decidedly encouraging this growth by granting waivers that allow up to two and half times the amount of originally permitted construction on individual lots. After all, each waiver comes with a fee that gives the city instant access to revenue. "That the city is granting more building rights is the liberal understatement of the century," proclaimed real estate agent Chava Tepperberg. "You are considered a total freier [sucker] if you build what is allowed in the city plan today. Contractors are willing to pay any price that the city asks for the waivers, because they know that it is economically beneficial to them in the long run," she added. Realtors are among the first to acknowledge the immediate economic benefits of the development as developers, contractors, and the municipality all reap handsome economic rewards. In addition, the projects inject new life into neighborhoods that have long suffered from lack of growth. Given the flight of businesses and young people in search of jobs away from Jerusalem in recent years, new developments clearly have the opportunity to enhance the city's neighborhoods, especially in the center of town. "Rehavia was a sleepy neighborhood with a lot of seniors who couldn't raise the level of the neighborhood," conceded Asaf Shaked, architect and urban planner at the International Cultural Youth Center located in the heart of the German Colony. City planners like Shaked are concerned, however, about the lack of oversight and central organization that has gone into the development of these neighborhoods. In addition, worried preservationists have launched more than a few legal battles in recent years to maintain the character of various buildings within the older neighborhoods like Rehavia. It's clear that foreign buyers, and particularly Americans, are the drive behind this upsurge. And so, the real issues concerning the character of Jerusalem's neighborhoods lie not just in the facades on the buildings going up, but more so in the consequences that foreign investment has upon the nature of the communities. "Although there has been a lot of talk about the French and the English buying here, the ones that really set the tone in the market are the Americans, and they have always been," Tepperberg stated. There are no hard statistics, but anecdotal evidence suggests that the vast majority of Americans acquiring homes in Israel view their new purchases as second-home residences and have little intention of living in them year-round. Instead, they come on twice-yearly pilgrimages during the popular holidays of Succot and Pessah and use these luxury apartments as general vacation houses. If the pattern of residency in David's Village overlooking the Old City can offer any insights into the future behavior, these new developments may well become ghost towns for much of the year, leaving them vulnerable to theft and petty crime. More noticeably, since these owners have no financial need or incentive to rent out their luxury homes, critics worry that these part-time residents will not contribute to the community in any meaningful way. Experts disagree, however, on what constitutes a meaningful contribution. "They have the same positive effect as tourists," explained managing director Werner Loval of Anglo-Saxon Real Estate. "Even if people don't move here right away, for them it is a foothold in Israel. It's an apartment for the parents to come on vacation. The next step is for the children to use the home while they study in Israel and then the grandparents use it to retire." Retiring grandparents, however, still don't grow a community. "A living neighborhood needs young families with children," Tepperberg stated. Young families with children, however, cannot afford to buy million and multi-million dollar homes. Critics fear that Jerusalem will lose a significant part of its vibrant population as young couples are forced to move into more affordable cities like nearby Modi'in. Shaked said he understands the effects of this phenomenon first-hand, since all four of his siblings left Jerusalem after failing to find property within their budgets. Pamela and Harold Falik, New Jersey residents who have been considering purchasing a second home in Israel, see the irony of this trend in their own family situation. The same top-dollar apartments that they have looked at for themselves have frustrated the efforts of their Jerusalem-based daughter and son-in-law to find a reasonably priced home in the city. Other young couples like Jerusalem resident Reuven Levy and his future wife found themselves the beneficiaries of a newly purchased modern apartment in Katamon purchased by Levy's California-based uncle. Not wanting the apartment to sit empty over the next few years, Levy's uncle decided to rent the apartment to the young couple below cost to live in once they are married. Critics are also fearful of another effect. As Jerusalem's young couples leave in search of less prohibitively priced housing, a second wave of flight will follow, as the parents of these young couples retire and decide to move closer to their children and grandchildren. Their replacements, Shaked noted, will be "people who come for holidays who don't have kids that go to schools, concerts or movies and who do not buy clothes from local retailers." Yet, within the boom, realtors have also observed other, different buying patterns among American consumers. While the high-rise developments appeal to the vacationers, the renovated homes in the older neighborhoods do also sell to younger couples planning to move to Israel permanently with their families in the near future. "It becomes a trend," Isaac Levy postulated. "When you see that your neighbor bought an apartment in Jerusalem, you also want one." It is anybody's guess as to why the American demand for property in Israel has suddenly surged. Realtors theorize that after the initial economic paralysis caused by 9/11, Americans not only see Israel as a viable place to live in the future. And young, mostly religious, Jews have the wealth and desire to own a little piece of the Promised Land. Developers and contractors are eager to appeal to this demand. Not only are the bigger and more modern apartments a direct response to the American styles, but real estate agents are going so far as to open up branches in the United States. From a new office in Brooklyn, Levy has created a marketing package that matches American buyers with a team of experts including financial specialists and lawyers to facilitate the mortgage and contract processes, through architects and designers to ensure his clients receive their ideal apartments. "We want to make the process more similar to buying an apartment in the States," he explained. He is not the only one. One of the larger and more established agencies in Israel, Anglo-Saxon Real Estate Development, recently opened up a branch in Manhattan and saw inquiries for Jerusalem property double, accompanied by a 50% increase in sales, noted Loval. A quick scan of the multiple realtors' Web sites shows many of them making a direct appeal to foreign investors, and Tepperberg easily attributes at least 70% of her business to Anglos purchasing from overseas. Whether this market demand will last or what the real long-term consequences of such purchasing power will be on Jerusalem's make-up is hard to predict. Jews have looked to Jerusalem for thousands of years, but the realities of the real estate market can be dictated by unforeseen events. "Our golden rule is that you never really know," Tepperberg concluded.