In Israel, real estate transactions represent a huge part of the country's economy (direct taxes on real estate transactions account for more than 7% of all taxes collected in Israel!). Most of these transactions are carried out in a very small number of cities.
A recent study indicates that in 2014, for example, 4,199 transactions concerning the most sought-after apartments (3 to 4 rooms) were completed in Tel-Aviv and 3,931 in Jerusalem, thus placing these two major religious, political and economic centers at the head of the country. In 33.9% of cases, these were first-time property purchases, in 46.2%, these transactions followed a change of city, in 34.7%, they were pure investments and in 11.2% of cases, they were acquisitions by foreigners.
It is in Tel-Aviv that we see the most first-time homebuyers (7.1% of local purchases), while it is often following a move that one buys an apartment in Jerusalem.
Tel-Aviv also positions itself as the city where Israelis buy the most for pure investment, while Jerusalem remains the preferred target of foreign buyers (28% of transactions carried out in Jerusalem are made by foreigners; by comparison, in Ashkelon only 2.3% of transactions are carried out by foreigners).
And one can only note that prices continue to rise impressively, both in Jerusalem and in Tel-Aviv. It now takes an average of 2,177,000 shekels to buy a 4-room apartment in Jerusalem and 3,000,000 shekels in Tel-Aviv. For information, 1,000,000 is enough for the same 4 rooms in Ashkelon.
But why on earth is it so expensive in Jerusalem???
No beach, buildings not always pleasant to look at, sometimes austere atmosphere... Certainly, but for more than 2000 years all Jews in the world have been tirelessly repeating "Next year in Jerusalem", and not "Next year at the beach or skiing"! Even Jews most distant from Judaism have heard this refrain which translated American-style would give: "Location, location, location".
That's where the shoe pinches. Jerusalem, 850,000 inhabitants and only 215,237 residential dwellings. On average, 81m2 per apartment. And if native Israelis are capable of considering themselves well housed in 35m2 because they raised ten children there, this is certainly not the dream of foreigners or new immigrants! So, if we remove from our 215,237 housing units the 21,000 apartments of less than 40m2, we only have about 194,000 apartments left "in stock"! Of these 194,000 apartments that not all owners necessarily wish to sell, only those located in central neighborhoods interest newcomers or foreigners, which leads us to finally consider only 43,800 potentially interesting apartments because they are located in the following famous neighborhoods: Centre-Ville, Na'hlaot, Shaarei 'Hessed, Re'havia, Katamon, Mamilla, Talbyeh, Kiryat Moshé, Baît Vegan, Rasco, Moshava Germanit et Yevanit, Baka and Makor 'Haim.
Problem, these apartments are inhabited!!! And by people who fully intend to stay at home!
However, potential buyers are very numerous.
Indeed, already among the local population, there are people who wish to buy or move. Also interested are new arrivals from other Israeli cities. Although the latter do not compensate for those leaving the city (each year about 10,000 people arrive while 16,000 leave for other cities, mainly to Tel-Aviv and Bet Shemesh), this movement still creates additional demand. New immigrants are also positioning themselves, and if formerly Haifa and Tel-Aviv were the favorite destinations for settling when arriving in Israel, today, Jerusalem has largely established itself as the city of first choice (in 2014, more than 11% of new immigrants settled first in the capital). And of these 2,800 new immigrants, a large majority (927) came from France, even exceeding those from America (678).
In summary then, strong local demand, strong national demand, and religious zionism that leads to a new form of zionism: real estate zionism, combining sentiment with financial security. And despite necessarily very high prices, despite architecture far from Haussmannian and an obstacle course to buy a property, it is indeed in Jerusalem that real estate investment seems most secure, leading more and more new buyers to explore new avenues ("administrative aliyah") to try to maintain absolute discretion, both here and in their country of origin or residence. Because if one is proud (for oneself) to be a property owner in Jerusalem, one doesn't necessarily want to display oneself as an Israeli property owner outside our borders...
So next year in Jerusalem? After all, as Theodore Herzl said"if you will it, it is no dream"!
Sources: Central Bureau of Statistics, Jerusalem Institute for Israeli Research, yad 2, The Marker, Ministry of Finance
