As Annexation Looms, Home Prices Are Climbing in West Bank Settlements

(Bloomberg Businessweek) -- The Jordan Valley settlement of Ma’ale Efraim isn’t exactly prime real estate. The land is arid and rocky, it’s more than an hour’s drive from Tel Aviv—Israel’s job engine—and it’s in the middle of a decades-long conflict that shows no signs of ending. And yet Shlomo Mizrahi, owner of local real estate agency Ad Habait, says property values there have jumped more than a third over the past couple of years as politicians have vowed to permanently claim the land for Israel. “There’s no doubt that the second we started to talk about annexation, it increased interest,” Mizrahi says.

Ma’ale Efraim sits in an area that Prime Minister Benjamin Netanyahu is pledging to annex, possibly as soon as July 1. Palestinians insist the land—about a third of the Israeli-occupied West Bank—belongs to the state they hope to build, but Israel says it’s strategic territory that it can’t give up. The issue gained renewed relevance in January, when President Trump unveiled what he called a peace plan that greenlighted annexation in return for a commitment from Israel to enter negotiations that could lead to a limited Palestinian state. Although Palestinians rejected the plan as one-sided, Netanyahu signed on to it at a White House ceremony.

It’s unclear exactly what form annexation might take, or even whether Netanyahu will ultimately go through with it. If he does, the Palestinians say they’ll cut off all cooperation with Israel and declare an independent state. And he faces strong opposition abroad, with many countries saying such a move would break international law, make Israel a pariah, and risk an outbreak of violence. “There will be no security and stability without giving the Palestinian people their rights,” says Nabil Abu Rudeineh, a spokesman for Palestinian Authority President Mahmoud Abbas.

Jewish settlers have lived in the West Bank since the 1967 Six-Day War, when Israel seized the territory from Jordan. Today some 400,000 settlers live in West Bank enclaves ranging from posh single-family villas and condos on hills overlooking Jerusalem to outposts of mobile homes and converted shipping containers deep in the desert. Even in suburban-style settlements adjacent to Israel proper, families typically shelter behind walls and high fences separating them from the West Bank’s 2.6 million Palestinians—most of whom live in urban tenements or crumbling farmhouses. Early settlers often viewed the area, which they call Judea and Samaria, as the Biblical heartland of the Jewish people, but later waves have been attracted more by the relatively low cost of living and generous government support than they are by religion.

Even as values across Israel have surged in recent years, prices in settlements have outstripped those elsewhere as more families choose to live in the West Bank. In Leshem, a hilltop settlement east of Tel Aviv, a 1,400-square-foot villa that sold for 960,000 shekels ($280,000) a decade ago now costs 2.5 million shekels. Developer Harey Zahav Ltd. (“mountains of gold” in Hebrew) has sold about 650 homes—ranging from four-bedroom garden apartments to six-bedroom penthouses with Jacuzzi baths, large terraces, and views of the Tel Aviv skyline—and expects to sell the final 30 this year. “It’s become like a suburb,” says Zeev Epshtein, owner of the developer. “It’s for successful, bourgeois, Zionist religious families.”

Real estate agents anticipate a further rise in prices with annexation, as it would lift a significant psychological barrier for many would-be buyers. “The first thing people search for in real estate is security,” says Daniel Wach, owner of brokerage Shorashim in the settlement of Eli. He says he’s gone from an average two deals a month to about five this spring, and he predicts annexation could boost values more than 20% over the next two years. “Judea and Samaria always had a question mark, and a question mark is not good for real estate,” he says. “They’re now putting on an exclamation point.”

Even though a unilateral step wouldn’t resolve the international dispute, it could end debate over whether some territory will ever return to Palestinian control. Already the increasing number of Israelis making their life on disputed land reflects growing sentiment that there’s little chance of the creation of a Palestinian state anytime soon—and will make it harder to achieve any deal. In the past, Israel indicated a willingness to swap some larger settlement blocs (effectively suburbs of Jerusalem) for land elsewhere, but this time there’s no concrete offer on the table.

The last territory Israel annexed was the Golan Heights, which it took from Syria. Israeli troops had occupied the fertile plateau overlooking the northern part of the country during the Six-Day War; in 1981 the government declared the land was part of Israel and shifted control from military to civilian administration. That change led to rapid development of Golan, now home to wineries, a ski resort, and about 20,000 Jewish residents even as only the U.S. recognizes Israel’s claim to the land.

A similar transition from military to civil law in occupied areas of the West Bank would dramatically increase property values, says Maayan Bachar, an attorney for Gavish Shaham Group, a developer of high-end housing. Regulations would be streamlined, there would be fewer political issues, and roads and other infrastructure linking settlements with the rest of the country would be upgraded. “If there’s a change in the status, the value of homes will rise significantly,” Bachar says. “We can deal with it like real estate in the rest of Israel.”

Yet it’s hard to see the plan leading to peace. With Palestinians furious at the idea, Israeli Minister of Defense Benny Gantz has told troops to prepare for heightened tensions in the West Bank. Annexation may be a boon to Jewish settlements, but the prospect is hurting property values in Palestinian-controlled areas. After rising rapidly for most of the past two decades because of a relatively strong economy, according to the Palestine Economic Policy Research Institute, prices haven’t changed since 2018 because of slowing growth and escalating tensions with Israel. “So many flats are empty because of two things,” says Adel Odeh, former president of the Palestinian Contractors Union. “Decreasing financial resources and the unstable political situation.” —With Fadwa Hodali

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