Two neighboring properties that were recently sold in the Jewish Quarter of Jerusalem’s Old City provide a window onto the most enigmatic real estate market in Israel. The environmental, religious, historical, and political conditions in the place considered the heart of the Jewish people make the real estate rules there different from anywhere else.
A two-room, 48 square-meter apartment at 1, Bonei Hahoma Street, on the second of four floors, was sold for NIS 2.61 million. A 2.5-room, 47 square-meter apartment at 5, Bonei Hahoma Street, on the first of two floors, was sold for NIS 2.84 million.
Bonei Hahoma Street, like most of the streets in the Old City, is actually a small alleyway. It is 240 meters from the Western Wall, in the middle of the Jewish Quarter, which is bounded on the western side by the Armenian Quarter and on the northern side by the Muslim and Christian Quarters. The eastern border is the Western Wall itself, and the Temple Mount, on which the Dome of the Rock and the Al-Aqsa Mosque are situated. On the south side, it is bordered by the Old City wall.
The apartments are in buildings constructed in the 1970s, and are described by realtor Moshe Regev of Old City Real Estate as "normal". "You can find similar apartments in Petah Tikva," he says. "There are many apartments in the Old City constructed in earlier periods, in unique buildings with high ceilings and/or with no windows, for example. These buildings may be fifty years old, but in the Old City they are considered new."
In a 2016 report by the State Comptroller on The Company for the Reconstruction and Development of the Jewish Quarter in the Old City of Jerusalem, it was estimated that 600 families lived in the Jewish Quarter, and that the area contained about 100 stores and businesses; 40 educational institutions, synagogues and institutes; and a hostel, museums, and visitor centers. According to Wikipedia, the company has built 500 housing units in the Quarter, two of which are the two recently sold.
Many of the transactions in the Jewish Quarter are divided into sub-transactions, and one property can be purchased through five transactions registered with the Israel Tax Authority. Taking that into account, not more than sixteen deals a year have taken place in the neighborhood in recent years. The peak years were 2018, 2021, and 2022, in which 15-16 deals took place. The low was in 2020, with just three deals, probably because of the Covid pandemic.
In the first eight months of this year, there were just five real estate deals in the Quarter.
The two deals we selected are an excellent basis for understanding the Jewish Quarter market, precisely because the apartments concerned are "normal", with no special features. The deal at Bonei Hahoma 1 works out at NIS 54,375 per square meter, while the deal at Bonei Hahoma 5 gives a price per square meter of NIS 60,426. Prices like that are characteristic of the prestigious Rova 3 and Rova 4 neighborhoods in north Tel Aviv.
Regev and real estate appraiser Kobi Bier agree that the two deals are within the market range. "You have to take into account that these are small apartments, and in this case they are such that the price per meter is higher than average," says Regev.
The two agree that, although it is easy to arrive at an average price for the Jewish Quarter, it is also easy to find exceptions. "Regular apartments in the Old City can start at NIS 40,000 per meter," says Bier, "but in the past I have signed off on a deal of over NIS 120,000 per meter. The view changes everything. It’s sufficient for there to be a small yard, or a roof balcony, and the value rises."
Regev: "You can find apartments with similar specifications, but no apartment is the same as another. As I have said, the physical characteristic of apartments can be extremely different, to the extent that there are apartments in old buildings with no windows. Besides that, most of the apartments in the Old Quarter are not renovated, and if they are, that pulls the price up significantly."
Why is that?
"Renovation work here is very expensive, because of the peculiar characteristics of the Old City. Trucks cannot enter the alleyways, and to carry out renovations you have to work in a very complicated way. You therefore come across many residential buildings that people haven’t renovated."
You mentioned the view. Does the distance from the Western Wall affect the price?
Bier: "Proximity to the Western Wall doesn’t make much difference. What’s more important is the view you see from the house."
Regev: "Perhaps knowing that you’re close to the Western All has some spiritual effect, but it doesn’t really affect the price."
If so, by how much does the view raise the price?
Bier: "The view can triple or quadruple the price, depending on its quality. For example, a year ago I dealt with a couple who bought an apartment next to the Armenian Quarter, that is, away from the Western Wall, but it had a roof balcony from which you could see the whole world.
"I valued the apartment at NIS 5 million or so, and they told me, ‘You’re right about the price, but the balcony is worth a million shekels more to us than the market price’, and they bought it for NIS 6 million. Apartments with a view of the Western Wall can reach levels of over NIS 100,000 per meter, and tens of millions of shekels."
After the Six Day War in 1967, in which Israel captured the Old City, the Jewish Quarter was in a neglected and ruined state, and the government decided to reconstruct it. In 1968, the area of the Jewish Quarter, amounting to 133 dunams, was expropriated and transferred to the Israel Land Authority. In 1969, The Company for the Reconstruction and Development of the Jewish Quarter in the Old City of Jerusalem was founded to rehabilitate the Jewish Quarter and develop it as a national, religious, historic, and cultural site.
Another important matter is the real estate market in the other quarters of the Old City: the Muslim, Christian, and Armenian quarters. Real estate deals in these quarters sometimes feature in the media, but in the news rather than in real estate programs, because of their explosive nature.
"Fifty years ago, it was promised that there would be parcelization in the Jewish Quarter, and only in recent years has the promise been fulfilled," Bier explains. "The other quarters were not included in the expropriation plan, and when deals are executed there you rely on Ottoman records and kushans (Turkish land registry documents, A. M.). Deals are done there, but, in the nature of things, those who buy properties in these quarters are mainly motivated by ideology and not commercial considerations. Many of the houses there are bought by Ateret Kohanim, and the prices are not market prices but reflect the risk taken by the sellers and the desire of the buyers to acquire the property. They are therefore higher, and not linked to the market. Those who really want to buy a property in which to live, do so in the Jewish Quarter."
In Jerusalem in general, the normal link between socio-economic levels and home prices is broken. Jerusalem is in socio-economic cluster 2, and, furthermore, 490,000 of its inhabitants, about half the population, live in neighborhoods ranked by the Central Bureau of Statistics in socio-economic cluster 1, the lowest in Israel. In fact, for decades the capital of Israel has been declining in socio-economic status.
At the same time, average home prices in the city are similar to those of Ramat Gan, which is in socio-economic cluster 8. How do Jerusalemites manage to afford the city’s housing prices? That is one of the perennial questions about the Jerusalem real estate market.
Within that paradox is the real estate market in the Old City. The Old City of Jerusalem has religious, national, and international importance, and apartment prices there are therefore driven by the desire of homebuyers not just to live in the best possible home in the best possible location, but also to fulfil some mission, religious and/or nationalist. The market in the Old City therefore has rules of its own.
Published by Globes, Israel business news - en.globes.co.il - on September 18, 2023.
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