Every good Jerusalemite knows the demeaning term “ghost apartments”. These are apartments purchased by affluent people from abroad, mainly used for family vacationers; so that for months, the apartments remain abandoned without kindergartens being opened in those neighborhoods for young couples, and without allowing residents to enjoy these prime locations.
This situation prevails once again today, after a long dormant period. So who’s interested in this? What refreshing change has occurred in the field? What is behind these acquisitions? What are the most sought-after locations? And how does this affect us – the Israeli group of investors?
Holiday apartments alongside Israeli real estate investments
First, we need to get things straight. In principle, this concerns wealthy Jews living abroad who wish to have a foothold in Israel. For some it is a conscious Zionist base that gives them a sense of security, while for others, it is just a family vacation base, along with economic considerations, but all this does not alter the test of the result.
Transatlantic real estate transactions are normally completed during visits, and often through zoom conversations. Everything works, and this is indicated by the dozens of sales of luxury properties mainly in the capital city of Jerusalem as well as in Israel’s secular capital city, Tel Aviv. At the same time, there are other locations attracting considerable interest, so that along with Tel Aviv and Jerusalem, quite a few purchases take place in Netanya and Herzliya Pituah, with some interest in Ashkelon too, chiefly for investment (rental).
Further support for price increases
Most of the interest comes from the U.S., but also from the UK and of course France. How does this affect domestic demand? Some say that the effect is entirely beneficial; however, it depends who you ask. There is no doubt that domestic prices are soaring, so that this is yet another building block in the unceasing trend of rising prices. Hence, if we look at what experts in the field say, we’ll find that they don’t expect a moderate decline in the coming years. Therefore, if demand overseas continues to increase, we can be sure that the prices of the various luxury properties will continue to soar.
Covid-19 slowed down but did not stop the trend
Let us stop for a minute and examine how Covid-19 has contributed to the overall situation. During the past two years, the trend has slowed down a little, mainly because it was hard to reach Israel to check out properties during this time. On the other hand, many people residing overseas sought a foothold for themselves in the country; therefore, precisely during the Covid-19 period, they endeavored to make sure they had a property in Israel. If we add to all this the fact that anti-Semitism has raised its head all over the world, one can start to understand why, with or without any connection to Covid-19, demand for properties in Israel has reached new heights.
Current Snapshot
Now that the skies are open once again, the scope of the transactions is constantly increasing. If in the not-too-distant past, apartments were sold to Jews living abroad mainly for vacation purposes, now many apartments are being purchased for residential purposes. Hence, if in
the past, mainly 3-room apartments were purchased, today there is a much higher demand for 5-room apartments.
Additionally, many are not seeking holiday apartments or even apartments for housing, but are simply looking for an investment, with the aim of renting out their property and enjoying a handsome return. However, not everyone is looking for a net lucrative investment, but, among other things, rather the Zionistic aspect of the investment – contributing to building the country, since many foreign investors are interested chiefly in apartments located in the north and south of the country.
If we wish to characterize the Jewish public that conducts purchases in Israel from overseas, we will find that some are religious, but there are also quite a few secular people. What is the common denominator of the various investment groups? The Covid-19 pandemic taught us that there can be no real substitute for the Jewish state, that has proved itself in contending with the pandemic, and at the same time, anti-Semitism has taught us that there is no safe place like home.
How does the Israeli investor benefit from the situation?
In conclusion, it is important to point out that since 2021 was defined as an astounding year for the investor in the real estate field, it just remains to be seen how the Jewish investor from abroad also enters the equation, since he helps push prices upwards, hence it remains to be seen how investors are taking advantage of this opportunity – whether by purchasing and upgrading properties, or investing in properties that enable long-term rental, for those Jews seeking to check the possibility of making aliyah.
Finally, we should make it clear that many of the investors from abroad are not necessarily looking for luxury apartments, but simply seeking to purchase an apartment in anticipation of aliyah. Thus, it is important to draw a distinction between prestigious deals and moderate deals. Here the datum of immigration to Israel should be added to the real estate equation, and accordingly, examine how the findings impact the total amount of investment that is on the table, taking into account that some prefer to live alongside ‘ghost apartments’, while others definitely seek to avoid this, since vibrant community life is important to them. The conclusion before making an investment? It is important to fully appraise the whole picture and know how to leverage opportunities.
