Jerusalem Land Lease Crisis Slashes Apartment Values by Half in Upscale Neighborhoods

The land lease crisis in Jerusalem has caused apartment values in prestigious neighborhoods such as Talbiya, Rehavia, and Nayot to drop by approximately 50 percent. Banks have stopped issuing mortgages to buyers in these areas, according to Doron Shmueli, chairman of the Jerusalem Land Leaseholders Forum. In a letter to Keren Kayemet LeIsrael (KKL) chairman Eyal Ostrinsky, Shmueli highlighted that uncertainty over the future of about 1,100 apartments built on land previously leased by the Greek Patriarchate and later acquired by American real estate tycoon Gary Barnett's Extell company has nearly paralyzed the housing market there.

Barnett purchased ownership rights to roughly 500 dunams in central Jerusalem for about 750 million shekels earlier in 2023. These lands, which include over a thousand apartments, hotels like Inbal and Prima, public institutions such as the Great Synagogue and the Israel Museum, are set to transfer to his ownership when the leases expire between 2050 and 2052. Currently, leaseholders hold rights through KKL, the primary lessee, but as the lease expiration approaches, uncertainty about property rights and tax implications grows.

Shmueli noted that property transactions have already been affected, citing a Talbiya apartment on One Ha'am Street selling for about 35,000 shekels per square meter, half the price of comparable sales nearby. He warned that as lease terms shorten, tax uncertainties increase since leaseholders might lose full ownership status. Shmueli urged KKL to accelerate negotiations with landowners to reach an agreement allowing leaseholders to purchase the land or extend leases. He stressed that a consensual solution is feasible and necessary to prevent a social and economic crisis in Jerusalem’s heart. While the forum is engaged in advanced talks with landowners, Shmueli expressed concern that without KKL’s leadership, progress may stall. KKL has yet to respond to the letter.