Nov. 13 (Bloomberg) -- When David and Rivka Wietchner bought a home in the West Bank Jewish settlement of Har Bracha, they swooned over the mountain view, the embracing community and the 375,000-shekel ($106,000) price of a six-room apartment.
Two years later, the Israeli parents of three were even more delighted to discover their home would now sell for about 500,000 shekels, or 33 percent more. Boosted by rising demand, home prices are surging in Har Bracha, Hebrew for the Mountain of Blessing, and other remote settlements in the northern West Bank, even though they’re the most likely to be torn down in any peace deal with the Palestinians.
“We love it here and it’s much more affordable than other places in Israel,” said David Wietchner, a 26-year-old graduate student in philosophy, sitting with his wife in their living room. The gated community, founded in 1983 and located in an area known as a flashpoint for violence, overlooks Nablus, the West Bank’s biggest city and economic hub.
The boom in settlement housing prices is outstripping rises within Israel’s internationally recognized borders, where prices have increased 8.1 percent since 2011, according to the Central Bureau of Statistics. Many settlers say they doubt both the likelihood of a peace deal that could force them out and authorities’ ability to evict them to make way for a future Palestinian state.
Palestinians claim the West Bank for the homeland they are trying to negotiate in talks that resumed in July. They view the rising numbers of Israelis there as an alarming sign of Israel cementing its hold on the land.
Much of the demand in the area comes from Orthodox Jews seeking a community where other families observe the Jewish law prohibiting driving on the Sabbath, said Yoseph Baal-Shem, a real estate agent in the settlement of Ginot Shomron. Also fueling the price boom is pent-up demand caused by the 10-month slowdown in West Bank construction that Prime Minister Benjamin Netanyahu ordered in late 2009.
“Homes used to be much cheaper here, but the market has corrected itself since the freeze,” Baal-Shem said.
Even with the rise in values, apartments in Israel’s most disputed frontier settlements typically cost about half the price of homes in Israel and often much less, real estate agents say. A Jerusalem apartment the size of the Wietchners’ would cost 10 times more, said Shelly Levine, a property agent.
Incentives to Build
While the government halted its longtime policy of offering mortgage breaks to settlers, it continues to offer smaller-scale housing incentives designed to attract people to live in the West Bank.
Israeli settlers show little concern that most countries treat their communities as illegal and obstacles to resolving the Arab-Israeli conflict. U.S. Secretary of State John Kerry lashed out at Israel for continuing to build in contested lands while negotiating statehood with the Palestinians. “It sends a message that somehow, perhaps, you’re not really serious,” he said after meeting with Netanyahu.
Yesterday, Netanyahu ordered his housing minister to reconsider moves to plan nearly 24,000 new settler homes, saying they would hurt the country’s efforts to press world powers to demand tougher restrictions on Iran’s nuclear program.
Justice Minister Tzipi Livni, the chief negotiator with the Palestinians, denounced the construction plans, saying their goal is “to prevent us from ever reaching an accord that will guarantee a secure, Zionist, Jewish and democratic state,” Army Radio said today.
Gershon Messika, head of Israel’s Shomron regional council that governs the Har Bracha area, said settlers are eager to build new homes. “People know the government won’t be able to move us,” he said in an interview at his office in Barkan, 15 miles west of Har Bracha and a similar distance to Tel Aviv. “We can’t keep up with all the demand.”
Because of the political complications, mortgages at the most remote settlements often include a risk premium of roughly a quarter of a percentage point and more restrictive terms than in other Israeli locations, said Tzvi Shapiro, general manager of First Israel Mortgage brokerage in Jerusalem. A buyer looking to purchase a $100,000 home in a settlement with a 50 percent down payment would pay an interest rate of 5.1 percent for a 30-year, non-inflation linked loan, Shapiro said. A similar mortgage in Tel Aviv would carry a 4.85 percent rate.
“It is quite common for appraisers to value properties in these areas as being anywhere from 5 to 15 percent below the purchase price, which only further limits the amount that prospective buyers are able to borrow against properties in these areas,” Shapiro said. He estimated 15 percent of the firm’s business comes from the West Bank and east Jerusalem, territories Israel captured from Jordan in 1967 that the Palestinians claim as the core of a future state.
Ability to Pay
Banks say they don’t discriminate against settlers. “If the property is considered legal by the government, our concern is the customer’s ability to pay, so we look at their salaries and other parameters like we do in other parts of Israel,” said Benny Shoukron, spokesman for Israel’s largest home-loan provider, Mizrahi-Tefahot Bank Ltd.
At Bank Hapoalim Ltd., Israel’s biggest bank by assets, “every mortgage application is judged on its own merits,” spokeswoman Ofra Preuss said, declining to elaborate. As elsewhere in Israel, mortgage terms don’t exceed 30 years, Shapiro said. He said a 30-year, fixed-rate mortgage, which is not linked to inflation, is currently 4.8 to 5.3 percent.
More than 120 settlements have been built in the West Bank since 1967, and nine Jewish enclaves have been erected in east Jerusalem. Together they house some 550,000 Israelis among an estimated 2.7 million Palestinians, according to census figures.
Israel has in the past proposed withdrawing from most of the West Bank and annexing adjoining areas where about 80 percent of the settlers live. When it left the Gaza Strip in 2005, it uprooted about 8,000 settlers and paid compensation of $200,000 to $300,000 for each home. It also dismantled four small settlements in the northern West Bank.
While Netanyahu has not been explicit about territorial concessions, he has said that under any deal, some settlements will be beyond Israel’s borders. That could leave Har Bracha, home to 2,000 people, and Yitzhar, with about 1,300, as candidates for eviction.
Palestinians, who have committed themselves to nine months of peace talks with Israel, have accused Netanyahu of undermining negotiations by pushing ahead plans for 5,000 new settler homes.
‘Survival and Resistance’
Nimer Issa, a 35-year-old member of the Palestinian security forces whose family owns an olive grove near Nablus, calls the settlements “cancerous” communities that probably won’t be removed. He says settlers cut down many of the trees.
“I believe in survival and resistance,” Issa said. “That’s the only way to protect my land.”
Housing starts in settlements rose 70 percent in the first six months of 2013 to 1,708 units, compared with the same period a year ago, according to Peace Now, an anti-settlement group. More than 60 percent of the jump was in the remote settlements considered most likely to be evacuated under a peace agreement, the group said in an Oct. 17 report.
“If it turns out we have to move, then I suppose we’ll have to leave,” Wietchner said, adding, “I really don’t think that’s going to happen.”
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