Jewish Settlements Draw Home Buyers

Prices rise sharply as some Israelis seek residences on disputed land

By Rory Jones and Orr Hirschauge, WSJ

KFAR TAPUACH, West Bank—The first time Michal Ronen traveled to her rental apartment in this Jewish settlement in the occupied Palestinian territories, a firebomb struck her bus.

“I was so hysterical,” she said. “I thought that happens every time.”

Now Ms. Ronen and her husband are looking to buy a home in Kfar Tapuach.

The eagerness of Israelis to own a home on disputed land is an increasingly important political and financial barrier to a comprehensive Israeli-Palestinian peace based on two neighboring states, critics of settlement expansion say.

Israel has said that settlements aren’t an impediment to a two-state solution because many of them could be exchanged for Israeli territory in a future deal.

Prices are rising faster in many Jewish settlements than in major cities such as Jerusalem and Tel Aviv because of strong demand from Israeli home buyers. Prime Minister Benjamin Netanyahu’s government is increasing the incentives for settlers, despite objections from the U.S. and other world powers to expanding the settlements.

Israel would almost certainly have to compensate settlers for moving from any land included in a future Palestinian state, according to researchers at the Tel Aviv-based Macro Center for Political Economics. That would amount to billions of dollars, depending on the number of settlers who had to relocate, the center estimated.

About 370,000 Jewish settlers live in the West Bank, and an additional 200,000 live in East Jerusalem on land Israel captured from Jordan in the 1967 war, according to Peace Now, a nongovernmental organization that monitors settlement construction. Israel recognizes 130 settlements in the West Bank, and considers roughly 100 other outposts of Jewish settlers in the West Bank illegal.

The settler population is growing faster than the Israeli population as a whole. The Jewish population in the West Bank grew 25% in the five years through the end of 2014, compared with 10% in Israel, according to data from the country’s Central Bureau of Statistics.

But housing construction hasn’t kept pace. Mr. Netanyahu has limited new construction in the larger West Bank settlements to a certain degree, under pressure from the Obama administration and the international community.

As a result, housing prices in some of the larger settlements have risen at a faster rate than in Israeli cities, according to data from the Israel Tax Authority collected and analyzed by Mesilaty Haim Real Estate Appraisal Co. Ltd., an Israel-based real-estate firm.

The market in the settlements also has been affected by a housing shortage in Israel, as contractors have built far fewer units than required to meet population growth in recent years, according to real-estate agents and an Israeli official.

In Kfar Tapuach, where Ms. Ronen lives, the price of land has more than tripled in the past five years, according to data from Israel-based property website Madlan.

A July report from the Quartet for the Middle East peace process, which comprises the U.N., the U.S., Russia and the European Union, criticized the settlements as one of the chief obstacles to peace between Israel and Palestinians.

Mr. Netanyahu responded to the report, which came amid an increase in Palestinian violence against Israeli settlers, by approving construction of hundreds of new houses in East Jerusalem, where Palestinians want to establish a future capital, and the nearby West Bank settlement of Ma’ale Adumim.

The West Bank appeals to Israelis because the houses are often larger, it is close to major cities, the schools are sometimes better and everyday life can be more affordable, according to real-estate agents. Some settlers are also ideologically driven to settle what they consider to be ancestral Jewish land.

Settlements get financial support from the government for education, services and the like, above and beyond what goes to other local governments. That additional funding has increased 31% since Mr. Netanyahu’s current administration came to power last year, to 18,000 shekels ($4,600) a year for each household, according to the Macro Center for Political Economics.

In Efrat, a settlement 10 miles south of Jerusalem, hundreds of people are on a waiting list to buy a home in the community, said Mayor Oded Revivi, who also serves as chief international liaison for the Yesha Council, a group that represents settlements. “Today, the majority of the population moved because of financial reasons,” he said.

Residents of Kfar Tapuach, a settlement of roughly 200 families near the Palestinian city of Nablus, said house prices have benefited from the growth of a university in the nearby settlement of Ariel.

Ms. Ronen said she and her husband, Yuval, moved to the settlement because Mr. Ronen studies engineering at the university. They live there with their three children. “We now really want to buy a house,” she said, adding that they say it has to be now because prices are “going up crazy.”