The Impact of War on Demand for Apartment Purchases in Jerusalem

According to data from the Central Bureau of Statistics, which examined real estate transactions in Israel between November 2023 and January 2024, it is evident that Jerusalem leads the table of apartment sales during the months of conflict by a significant margin compared to other Israeli cities.

Key highlights from the CBS website:

1. According to the Central Bureau of Statistics, in January 2024, 7,890 apartments were sold, just three months after the outbreak of war in Israel. This marks an 18% increase compared to January 2023 and a 21.9% increase from the three months preceding the war (August-October 2023).
2. Between November 2023 and January 2024, 1,224 apartments were sold in Jerusalem (584 new apartments and 640 second-hand apartments).
3. Although Jerusalem has led in building permit issuance in the past year, the shortage of workers slows down the pace of construction, and there is now limited inventory in new projects of around 5,500 apartments.
4. Construction decreased by 20% in 2023, and currently, there is a shortage of 200,000 apartments in Israel to match supply with demand.

What causes the demand for property purchases in Israel to persist even during wartime, and why does Jerusalem lead in sales data?

1. The demand for apartment purchases is increasing among Israeli residents due to a natural population growth rate. However, for many years, bureaucratic hurdles have slowed down developers and contractors from starting new projects at a sufficient pace, naturally leading to high demand against a dwindling supply.
2. The halt in the entry of construction workers and the freezing of construction – due to the war, the entry of Palestinian workers has stopped, and the government is seeking alternatives such as Indian, Chinese, etc. Meanwhile, the demand for property purchases continues to grow as the construction initiation rate decreases, and there are delays in delivering apartments in projects under construction.
3. In recent years, the municipality of Jerusalem, led by Moshe Leon, has encouraged many developers to build in the capital, emphasizing urban renewal projects. As a result, in the past year, we have witnessed a much greater demand for new apartments over second-hand apartments, primarily because these projects are being built with a secure safe room.
4. Positive migration – Jerusalem is a very diverse city that attracts many buyers with varying needs and high economic capabilities. Since the beginning of the war, there has been a significant increase of about 400% in foreign residents purchasing apartments in Israel.
   Antisemitism against Jewish communities and a desire to strengthen the economy and Israeli society are the main reasons for bringing Jews from the Diaspora to Israel, with most foreign buyers interested primarily in Jerusalem. 50% of them come from the United States, and the rest come from Europe, South America, Australia, and South Africa.
5. Purchases by entire families and communities in the process of immigrating to Israel have a significant impact on apartment purchases in the Jerusalem market.

Regarding Jerusalem, it seems that 2024 will continue to show that Jerusalem is a stable and secure market, characterized by a very good transaction rate despite the war. Additionally, the recent trends in declining interest rates and the dollar’s value against the shekel are causing foreign residents to buy more in the Jerusalem luxury market.

Moreover, in recent years, Jerusalem has undergone a real revolution in promoting urban renewal projects, city infrastructure improvements, and progress with the flagship light rail project, which is expected to make many areas in the city more accessible and increase the value of properties near light rail stations.

Considering the data and trends outlined, along with the increasing number of immigration cases and the rise in antisemitism against Jews from the Diaspora, with the slowdown in construction, prices are expected to rise even further. Therefore, anyone interested in purchasing a property in Israel, particularly in Jerusalem, should expedite the real estate acquisition process, as Jerusalem is different from the Israeli landscape. The combination of the parameters of the capital city, with its diverse population, communities, and trends, along with economic capabilities, foreign players, and diversity in the property, will continue to make Jerusalem the center that leads real estate in Israel and a focal point of attraction for many customers.