The trend saving the Jerusalem real estate market from a downturn

The Israeli housing market is currently experiencing a slowdown, with the number of real estate transactions decreasing. However, foreign residents are acting as a balancing factor by purchasing luxury apartments in Jerusalem. Jerusalem and Tel Aviv are the two cities with the highest number of unsold apartments, which would typically suggest a price drop. Yet, a sharp decline has not occurred in Jerusalem, partly because most of these units are in early stages of construction and partly because the luxury segment is sustaining the market.

It is important to note that CBS data for May-June indicates a 1.8% increase in real estate prices in Jerusalem. This follows two months of stagnation, signaling significant shifts within the city during June.

How many luxury transactions are taking place? According to Tax Authority data, between May and June of this year, there were at least 8 transactions involving eight-figure sums of 10 million shekels or more. This is a high figure for a period of market slowdown, demonstrating the resilience of the luxury sector. The largest transaction was the purchase of a 200 sqm apartment on Shmuel HaNagid Street for over 18 million shekels. Early July data suggests the market has stabilized, with most transactions averaging 30,000–35,000 shekels per sqm.

According to the CBS, 1,386 apartments were sold in the city between March and May (539 new and 847 second-hand). Jerusalem ranks second in Israel for new apartment sales and first for second-hand sales. Over the past year, more than 6,000 apartments have been built in the city, the second-highest figure in Israel after Tel Aviv-Yafo.

"Jerusalem is a unique real estate market that does not always behave in accordance with national trends. Its status and symbolism generate demand from foreign residents and diverse populations, keeping demand significant even during slowdowns," explains Adv. Ido Shmueli, a real estate expert. "This is bolstered by policies encouraging construction and urban renewal, which together create relatively high activity even when the national market is moderating."

Elchanan Revach, a broker specializing in boutique real estate, adds that there is an emotional component to purchasing decisions: "Location is a central consideration everywhere, but in Jerusalem, it carries a different meaning. The difference can be between one street and another, or even between two adjacent buildings. People choose an apartment not just for the price or specifications, but for the feeling the place gives them."

Urban renewal projects are also balancing supply. Adv. Moshe Menashe argues that high-rises provide the economic feasibility required for large projects along main transport axes, while medium-scale construction in older neighborhoods integrates better into the local fabric and maintains the quality of life for residents.

Our analysis shows that Yesodot Shituf of the Kahan Group (owned by Yechiel Kahan) dominates the urban renewal market in Jerusalem. Companies such as Tara Nadlan, Capital Gold, Yetad Urban Renewal, and the Beit Yerushalmi Group are also building a significant number of apartments.

It is estimated that as the security situation remains tense, the number of immigrants to Israel will increase. Simultaneously, there is a growing trend of foreign residents purchasing apartments in Jerusalem and nearby Modiin as they prepare for the possibility of immigration, with significant interest coming from the USA.