"The truth...is that Palestinian guerrillas see the settlements and settlers as legitimate targets for mortar attacks and drive-by shootings."

[The Independent - 4 May 2001]: When the real estate sharks of California began to coax Americans to Los Angeles early in the last century, they stuck oranges on the trees to make the desert more alluring. The oranges are real enough in the groves on the hills around Jerusalem, but the hard selling is just the same.

And so is the use of illusion. Huge advertising placards jostling to catch the buyer's eye at the entrance of Har Homa show a world of suburban order; honey-coloured luxury flats with roof terraces and double garages rise out of a gentle Western (and therefore green) landscape under an azure sky.

No mention is made that this is occupied territory, illegally annexed by Israel in 1967, and that the new town is not, as Israel insists, part of south Jerusalem but a Jewish settlement being created as part of a matrix of suburbs intended to establish overall control over the divided holy city.

The builders were working feverishly this week and so were the estate agents ­ despite the presence on the other side of the hills of Israeli tanks, which regularly blast away at Arab villages on the West Bank in an effort to winkle out Palestinian gunmen.

In 1997 there was an international outcry when Israel's government, under Benjamin Netanyahu, gave permission for the first phase of Har Homa to begin on a hilltop less than a mile from Palestinian-run Bethlehem and on the edge of two Arab villages, Umm Tuba and Sur Bahr. The Americans made dutifully angry noises, then voted against two UN General Assembly resolutions calling for an immediate halt to construction. The EU "deeply deplored" it as a "contravention of international law". The Palestinians warned there would be a huge wave of violence.

That violence has now come, sweeping away more than 500 lives in seven months. One component that detonated the cocktail of explosives was fury over Israel's steady expropriation of the land on which the Palestinians hoped to build their state.

When Har Homa was started, it was to have comprised 6,000 homes. The Jerusalem city authorities have announced recently that they intend to build another 2,800 units, even though few of the flats have been sold.

You have only to drive through it to see the pace with which work is proceeding. The smell of dust and clatter of construction pervades the atmosphere. Bulldozers are completing the final few yards of a dual carriageway that arcs down from the Bethlehem-Jerusalem road to the settlement's edge. Hundreds of labourers ­ eastern Europeans, Asians but also many Palestinians ­ are fitting out the luxury blocks. Giant yellow cranes swing overhead.

The scene does not look much like the utopia on the billboards, let alone what it once was ­ a tranquil pine forest fanning over a hill whose true, Arabic name is Jabal Abu Ghneim. This is a fortress, a tight cluster of modern blocks, some nine storeys high, which dominates the land between the ancient cities of Bethlehem and Jerusalem like an enormous malevolent battleship.

Palestinian pleas for a settlement freeze ­ one that their officials say must include east Jerusalem ­ are a crucial component of the Egyptian-Jordanian ceasefire proposals, which Shimon Peres, Israel's Foreign Minister, was to discuss with George Bush in Washington yesterday.

The freeze has been brushed aside. The Israeli Prime Minister, Ariel Sharon, says there will be no new settlements, but he insists on the right to continue the expansion of existing settlements to accommodate "natural growth", even though there are thousands of empty settler homes on the West Bank. The Palestinians have heard about "natural growth" from the Israeli government before, only to see more and more bites taken out of their land.

As the Oslo peace negotiations dragged on, Jewish settlements in the West Bank and Gaza grew by more than 50 per cent, nurtured by hefty amounts of Israeli government money. While the Palestinians were told that the settlement issue would be dealt with in the final stages of the negotiations, the Israelis built away, ignoring commitments to take no unilateral actions that would prejudice the key issues in the final peace deal ­ such as the future of Jerusalem, in whose eastern half the Palestinians want their capital.

And so it continues, despite growing evidence that Israelis are not much interested in life on the front line at present. Sales of houses in settlement-suburbs in Jerusalem's occupied half ­ such as the sprawling Ma'aleh Adumim guarding the gateway to the Jordan Valley ­ have sunk to a trickle. Israelis who moved there not for ideological reasons but for cheaper and better apartments are now thinking twice before living in a conflict zone.

In the sales offices of Har Homa, the executives are putting a brave face on matters. Victor Messiga works for a development company that has built 54 houses, costing between £89,000 and £164,000, primarily for Orthodox Jews. Fourteen had been sold, he said, so sales were "going well". He denied living on the front line was a problem. After all, wasn't security an issue for Israelis everywhere? And wasn't Har Homa just another part of Israel?

The truth, though, is that Palestinian guerrillas see the settlements and settlers as legitimate targets for mortar attacks and drive-by shootings. The death toll is rising steadily. Added to it this week was 30-year-old Assaf Hershkowitz, a settler from Ofra, shot dead in a roadside ambush near the spot where his father was killed three months earlier.

Until there is a complete end to such violence, Mr Sharon says he will not negotiate with Yasser Arafat. Yet while the bulldozers go on digging, so do the grave diggers.