Real estate in the south of Israel after the October 7 attacks

Despite the terrible tragedy they experienced just eight months ago, the cities in the “Gaza envelope” area – Ashkelon, Netivot, Sderot, and Ofakim – are again leading in home purchase transactions, with hundreds of purchases recorded in the first quarter of the year. The reasons behind this include favorable prices for first-time home buyers, investor confidence in the area’s future, and a sense of “old-school Zionism.” Additionally, a new settlement is being planned.

Last week, Y.H. Dimri, one of Israel’s largest residential construction companies on the Tel Aviv Stock Exchange, released its financial statements for the first quarter of 2024. The reports showed that the company sold 298 apartments during the quarter, a typical number given its size. However, the geographical distribution of the apartments sold stood out. Of the total 150 apartments, just over half were sold in the city of Ofakim, which was a primary target of Hamas during the October 7th offensive, resulting in the deaths of dozens of residents. Moreover, several dozens of apartments were sold in Ashkelon and Netivot, located near the Gaza border. As a result, about two-thirds of all the company’s apartment sales were in the area of the “Gaza envelope” (or “Resurrection Zone,” according to the new name given to it by the government).


Indeed, Y. H. Dimri has a “southern” focus, but these figures are not coincidental. Data from the Central Bureau of Statistics (CBS) regarding home purchase transactions in the year’s first quarter shows that 484 new apartments were sold in Ashkelon, ranking it fourth in Israel. In Netivot, 332 new apartments were sold, placing it 10th, and in Ofakim, 284 new apartments were sold, ranking it 14th. In all cases, these sales volumes far exceed the relative size of these cities. What, then, explains this trend?

Several explanations contribute to the increased demand for homes in the “envelope” cities. On the demand side, these cities offer a combination of advantages for homebuyers. Firstly, prices are affordable. In Sderot, for instance, purchasing a new four-room apartment for a million shekels is still possible – a price point that most Israeli cities have surpassed for similar properties. In Netivot and Ofakim, which are farther from the border, the prices range between 1.3 to 1.4 million shekels. These affordable prices make these cities appealing destinations for first-time home buyers and represent attractive investment opportunities for investors.

Another advantage is their location, which is considered peripheral according to Israeli real estate market definitions. It is also well-connected to the country’s center from a transportation point of view through an efficient road system and rail. Sderot, Netivot, and Ofakim are situated along the railway line between Be’er Sheva and Ashkelon, and from Ashkelon, there is a high-frequency train line to Tel Aviv.

As for the security threat posed by the Gaza Strip, while it is undisputable that this threat materialized tragically on October 7th, there seems to be a prevailing attitude among home buyers and developers that this threat has already manifested and will cease to exist after the war. As one local real estate broker described it, “Gaza is an explosive barrel that has already exploded.”

Undoubtedly, there are still many individuals who remain hesitant to reside in the envelope area after the events of October 7. However, there are also those who, precisely because of the disaster, are interested in relocating to the area to help settle and strengthen this region. In recent months, several prominent initiatives have been highlighted in the media. One such initiative belonged to Roy Azizi, a young individual from Jerusalem who, upon completing his reserve service, relocated to Kibbutz Gevim and initiated efforts to establish new and young communities in the envelope area, particularly in rural areas.

Several kibbutzim in the envelope area, including Gavra’am and Ein Hashlosha, recently welcomed dozens of new members despite ongoing evacuations. However, there are also individuals who have been evacuated from the area and no longer wish to return after living in the central region for almost eight months.

The supply side is another contributing factor to the high number of transactions in the region. This involves governmental bodies, such as the state, actively promoting large-scale construction plans for tens of thousands of housing units in cities within the region and the Israel Land Authority (ILA), which oversees their marketing.

Two weeks ago, despite objections, the planning authorities approved the deposit of a plan to expand the “Afikei Nahal” neighborhood in southeastern Ofakim. This expansion plan includes adding 5,800 housing units, 30,000 square meters for employment, and 36,000 square meters for commercial use. This is in addition to the 6,900 apartments already built in the first and northern parts of the neighborhood. Meanwhile, in Netivot, the state plans to promote a new neighborhood comprising 15,000 housing units.

real estate in south israel
Aftermath of October 7th Massacre, Kibbutz Be’eri (KRifkind Photography)

It’s important to acknowledge that not everyone embraces the extensive construction plans being promoted in the area. This is because, in order to build tens of thousands of apartments, the state expropriates thousands of dunams of agricultural land, currently used by the area’s kibbutzim, some of which suffered severe attacks and atrocities on October 7, leading to the evacuation of their residents from their homes.

As an example, the Acting Chairman of the Sha’ar Hanegev Regional Council, Yossi Keren, highlighted the proposed construction of the new neighborhood in Sderot, which is expected to be built on about 1,600 dunams belonging to Kibbutz Nir Am. Keren remarked, “This plan originated under questionable circumstances, and promoting it now is the most unethical move the state can make concerning Nir Am. While we acknowledge the significance of Sderot, it is still years away from reaching its maximum potential”.

These new neighborhoods are part of the plan to establish a new community named Hanoun. Last November 7, exactly one month after the Hamas attack, the National Council for Planning and Building approved the proposal for this community. Initially, it aims to house around 500 families, comprising religious and secular families, to consolidate settlement in the region.

It may be difficult to imagine a different reality in the midst of the ongoing conflict, the partial evacuation of residents, and enduring rocket fire from the Gaza Strip. However, it seems that beneath the surface, conditions are slowly forming for the renewal of prosperity in this region, both in terms of planning and the demand for housing there, which indicates the public’s optimism for its future. Hopefully, this trajectory will continue to unfold positively.

The contents of this article are designed to provide the reader with general information and not to serve as legal or other professional advice for a particular transaction. Readers are advised to obtain advice from qualified professionals prior to entering into any transaction.

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