There was a revealing discussion two years ago about Azorim’s plan to transform the area of workshops and offices at the corner of Yermiyahu Street and Aholiav Street near the western entrance to Jerusalem into 14-20 floor residential high-rises.
Looking at the plans, Jerusalem District Planning and Building Committee between chair Shira Talmi Babay wondered where were the open spaces for 2,000 children to play. Jerusalem Local Planning and Building Committee chair Eliezer Rauchberger replied that there wouldn’t even be 500 children there, because the children of the apartment owners would be in New York, Montreal and Toronto. Rauchberger said that Azorim wouldn’t even bother marketing the apartments in Jerusalem because of the high prices.
Investigations by “Globes” has found that dozens of such projects with prices of above NIS 10 million an apartment are under construction, designed for Jewish foreign residents. Past experience shows that most buyers of these apartments are neither Israelis nor foreign residents with plans to immigrate to Israel but wealthy buyers looking for a vacation apartment that remains empty for most of the year.
In the past, municipalities have not been quick to admit that they were encouraging development of ‘ghost’ apartment projects in their planning policies, but in Jerusalem this era is apparently over, as can be gleaned from the discussion between Rauchberger and Talmi Babay.
Nevertheless, the municipality claims it is working to prevent the increase in the phenomenon, but even if this is true, the data show that any actions are not significantly affecting the situation.
The municipality profits, but what about Jerusalem’s residents
The issue of ghost apartments first arose during social protests in 2011. Activists claimed then that there are large cities, including Jerusalem, Tel Aviv and Netanya, where some projects were being built exclusively for wealthy foreign residents, at prices that even wealthy Israelis have difficulty meeting. Consequently activists insisted, the real supply of apartments in those cities was significantly smaller than the supply on paper. In the field, projects were indeed found with entire marketing was done abroad and in foreign languages.
Activists claimed this was a practice encouraged by the municipalities, as it is a WIN-WIN for them: the municipality receives high property taxes on these apartments, while their residents need few municipal services, since most of them do not live in the apartments at all, nor do they rent them out, but rather use them as vacation homes.
Buyers of apartments in Tel Aviv did so mainly during their summer vacations, while buyers in Jerusalem, most of whom come from religious and ultra-Orthodox populations in English and French-speaking countries, visit the apartments during the holidays of Tishrei and Passover.
This is not only a problem of the exclusion of the local population from many areas in cities – for example, the seafront promenade and Hayarkon Street in Tel Aviv; the seafront Nat-600 neighborhood in Netanya; and areas such as David’s village in Mamilla, Jerusalem – but also of the encroachment of land, local interests, and the urban and provincial planning and construction system, for the benefit of people who are not residents and do not belong to the urban social fabric.
Efforts to force owners of ghost apartments to rent them out did not succeed because few local residents could afford such high rents.
How many ghost apartments are there in Israel?
How many ghost apartments are there? The answer to the question is not simple, as only a minority of empty apartments meet the profile of ghost apartments. Most empty apartments are not ghost apartments, but homes that are not suitable for habitation, or apartments in poor condition that have remained empty for a long period of time.
According to the Central Bureau of Statistics, in 2022 there were about 200,000 empty apartments in Israel. However, the Knesset Research and Information Center, which cross-referenced various sources in an attempt to estimate the number of ghost apartments, concluded that four years ago there were about 38,000 apartments in Israel that met the definition of apartments that are rarely occupied, an increase of about 33% from 2011 – but this is also only an estimate.
The most accurate figure regarding Jerusalem came from the municipality nine years ago. At that time, the Minister of the Interior granted permission to municipalities to charge owners of ghost apartments double the property tax. The Jerusalem Municipality conducted an inspection based on water meters and found that there were 6,500 such apartments in the city at the time. However, the permit from the Ministry of the Interior has since expired.
The Jerusalem Municipality told “Globes,” “It is very difficult to closely monitor the extent of the phenomenon, since it is not possible to know for sure when the apartment is occupied, when it is empty, and what the reasons are. Also, there are no legal measures that would help reduce the phenomenon at the national level.
“A few years ago, there was a regulation by the Minister of the Interior that allowed such apartments to be charged double property taxes. The City Council approved it and the Ministers of the Interior and Finance approved charging in this way. The regulation was valid for two years, but it was not renewed, and therefore there is currently no legal possibility of charging such apartments double property taxes.”
Foreign residents strengthen their grip on Jerusalem
To what extent is the Jerusalem luxury housing market an exception to the overall luxury market in Israel? Examining the data between 2021 and 2023 (final data for 2024 has not yet been published) shows that the total number of transactions for apartments worth NIS 10 million or more in the city constitutes 2.5% of all transactions carried out there, while on a national level it is only 0.5%.
Although in Tel Aviv the rate of luxury deals (over NIS 10 million) reaches about 5% of all deals carried out in the city, the Tel Aviv luxury market is based on the local population. Average apartment prices in Tel Aviv are almost 50% higher than those in Jerusalem (according to the Central Bureau of Statistics) and in Tel Aviv there are quite a few neighborhoods in the highest two socio-economic clusters (9 and 10), while Jerusalem is one of the poorest cities in Israel.
Ministry of Finance chief economist’s data show that in recent years the number of foreign residents buying apartments in Tel Aviv has declined significantly, while in Jerusalem, in contrast, the phenomenon is on the rise significantly. On average, foreign residents bought about 100 apartments per month in the city last year, about two-thirds of all purchases by foreign residents in Israel.
Along with the increased purchases by foreign residents in Jerusalem, the number of luxury deals completed in the city has jumped in recent years. While the Israsel Tax Authority website recorded an average of below 20 annual deals in Jerusalem, of more than NIS 10 million between 2015 and 2020, in each of the last three years, over 70 such deals were carried out in the city.
Thus there is growing concern that the city is being haunted by a new wave of ghost apartments, especially in the towers being built and planned in the city, some of which, in the heart of the city, are a major target for foreign residents.
There are several differences between the current wave of ghost apartments and the previous wave that hit the city about 15 years ago: At that time, the apartments were lower-density and closer to the Old City, like David’s Village in Mamilla.
Another difference is in the size of apartments. Previously they were all very large, while now there are also two and three bedroom apartments.
The third difference is that previously apartments stood empty for months, but today awareness of short-term rentals is much higher, and estimates among local real estate professionals is that some apartments are rented out on the Airbnb website for NIS 1,000 per night and more.
More than 30 projects with apartments costing NIS 8 million or more
“Globes” found that there are currently more than 30 new projects in Jerusalem where apartments cost upwards of NIS 8 million. Not all of them are towers, and there are also projects in new buildings of up to 10 floors, where prices are very high, but there is definitely a correlation between the number of towers and the number of luxury deals.
The average for a luxury deal in Jerusalem is about NIS 65,000 per square meter, but the price range is very high, ranging from NIS 50,000 per square meter to locations where prices reach more than NIS 90,000 shekels per square meter. In a tower near Agrippas Street and Machane Yehuda, which will have 31 floors, apartments have been sold for between NIS 8 and 28 million. A 33-floor tower on Yermiyahu Street, has seen apartments sold in recent months for between NIS 8 and 13 million. In the old Shaare Zedek Hospital complex on Jaffa Road, the 42-floor Midtown project is being built by Israel-Canada, and in recent months apartments have been sold for between NIS 8 and 11.6 million. In the two 31-floor towers built in the Caf-Het Street project by Mahane Yehuda, three apartments were recently sold for prices ranging from NIS 10.8 to 27.8 million .
Jerusalem Municipality: “Working to reduce the number of empty apartments
The Jerusalem Municipality said, “Apartments that are mostly empty are mainly in the prestigious areas of the city – the city center and the historic city. Most of their owners are Jews from abroad. The reason is the city’s status as a global hub for Diaspora Jewry and a leading tourist city.
“The municipal policy encourages the purchase of residential apartments, which leads to an increase in population that brings not only economic value to the city but also movement in public spaces, development of employment, cultural, leisure, sports and everything that the city has to offer its residents.
“The municipality maintains a continuous dialogue with developers and works to reduce the phenomenon of empty apartments by insisting on the introduction of a large number of rental housing projects in the city center and in general, as well as by ensuring a mix of apartments that also includes smaller apartments, an intensive mix of uses combined with commercial space, things that are less attractive to the public interested in purchasing an apartment for non-residential purposes. The municipality is also working to increase construction in the city’s urban renewal complexes, where the phenomenon is less common.”
Published by Globes, Israel business news – en.globes.co.il – on February 23, 2025.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2025.
