January 19, 2006
Israel Real Estate Sales to Foreign Buyers on the Rise
Despite the vast influx of French immigrants and tourists who are buying up apartments in many parts of Israel, most notably in Netanya and Jerusalem, Americans are still in the forefront when it comes to big money properties.
There has been a tremendous growth in the foreign real estate market, according to Stuart Hershkowitz, deputy general manager and head of the international division of the Bank of Jerusalem.
"The main thrust of the Americans is on more expensive apartments," Hershkowitz said.
Luxury market sales have shot up by 120 percent over the past 18 months, he said. "If we saw a $1 million deal once a month, we now see a $1 million deal once a week."
Americans seeking to buy in Jerusalem prefer the neighborhoods of Talbiyeh, Rehavia, Katamon, Baka and Sha'arei Hessed, and are willing to pay up to $1million for apartments of less than 100 square meters, Hershkowitz said. Recently they have discovered Nahlaot, he added, and many people are now buying their holiday homes in this more colorful part of Jerusalem.
After the Americans, the most serious foreign buyers of real estate in Jerusalem are the British, followed by the French.
Some of the apartments are purchased as investments, Hershkowitz said, but 70 percent of buyers don't rent out their apartments even if they come to Israel only once or twice a year. "They want their own place and they want it empty," he said.
Hershkowitz recalled that four years ago, at the height of the intifada, few people were coming to Israel.
"Now the hotels are all full," he said. In 2005, NIS 100 million was being spent in transactions by foreign investors per month, compared with NIS 200 million for the whole of 2000. "Whole communities are interested in buying property in Israel."
Throughout the intifada, real estate prices either dropped or remained constant, said Hershkowitz, who envisaged that prices will now move into an upward spiral.
Former Israeli ambassador to Washington Zalman Shoval, who was one of the founders of the Bank of Jerusalem and is currently co-chairman of the First American Israel Real Estate Fund, had been to America a few days earlier in his capacity as a member of the international advisory board of the U.S. Council on Foreign Relations. Anyone who listens to American economists, Shoval said, might think that America is on the verge of bankruptcy. Certainly if one looked at the deficit in the U.S. balance of payments, there is room for worry, he remarked.
On the other hand, he said, there has been an impressive improvement in Israel's economic situation. The deficit in the budget stands at NIS 2.9 billion compared to NIS 10.6 billion in the previous year; the gross domestic product per capita has expanded by 7.5 percent, and 180,000 new jobs have been made available.
In Shoval's perception, this positive trend will continue, but could be hampered by the fact that Israel is in an election year. This could have a reverse effect on economic gains if the political leadership gives in to populist demands, he said.