Low dollar shakes up real estate market

American buyers undeterred by "more expensive" local properties.

September 28, 2007 01:46
4 minute read.
us dollar bills 88

us dollar bills 88. (photo credit: )


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The new reality of the dollar's weakness against the shekel is leaving its mark on some foreign buyers, while local purchasers appear to be benefiting from the weak US currency. "Fluctuation in the shekel-dollar exchange rate is not so much a problem of buyers but of sellers," said Benny Loval, general manager of the Anglo-Saxon Jerusalem real estate agency. "Sellers hold off selling their property or they adjust prices upwards." Similarly, Alyssa Friedland, co-owner of RE/MAX Vision and RE/MAX Capital in Jerusalem, said that as a result of the continued plunge of the dollar many sellers are setting a minimum dollar-shekel exchange rate to neutralize the impact of the volatility. "We just sold a second-hand property in Old Katamon to US foreign residents, which was offered for $1.15 million three months ago on the condition of a minimum exchange rate of NIS 4.2 against the dollar," said Friedland. Over the course of the three months it took to complete the deal, however, the dollar dropped to levels of NIS 4.03 but the seller insisted on the minimum exchange rate of NIS 4.2, which would have raised the price of the property to around $1.19m. in shekel terms for the US buyer. "Following negotiations the two sides came to a compromise and the US buyer agreed to pay around $20,000 more and the property was sold for $1.17m.," said Friedland. "This just shows how the market adjusts to this new reality but for US buyers this situation creates confusion." Following last week's Federal Reserve decision to cut interest rates by 50 basis points, the dollar dropped over 1% and is now trading at three-month lows and is once again approaching the psychological barrier of NIS 4 to the dollar. The exchange rate was 4.027 on Thursday. Still, Hillel Sana, manager of International Private Banking at Bank of Jerusalem, which on Sunday will host its annual meeting for foreign resident clients, said foreign buyers, in particular from the US, the UK and France continue to show much interest in buying property here. "We see a lot more traffic, mainly from US high net worth property purchasers, in the recent summer months and the high holidays and continued interest in the central areas of Talbieh, Rehavia and the German Colony [areas of Jerusalem]," said Sana. "However, at the same time, we are seeing some impact of the shekel-dollar exchange rate on the lower mid-end market, which has slowed down a little bit in the areas of Ashdod and Netanya." Even as US real estate markets continue to suffer from the subprime mortgage crisis, local experts say there has yet to be an impact on the local property market or on foreign buyers. "Until now we have seen no impact," said Hanan Schlesinger, CEO of the Anglo-Saxon real estate agency. "However, should the crisis persist, leading to a crisis in the real estate market lowering the value of assets, we might see a decline of foreign buyers in Israel." Meanwhile, Loval at Anglo-Saxon Jerusalem, which next week will hold a seminar in Jerusalem with real estate experts and Bank Leumi representatives to assist foreign residents and tourists, who want to "Have a Foothold in Israel," said the capital was experiencing unprecedented demand, in particular for new projects. The real estate agency noted that property sales to foreign residents had risen by 20% over the past year to a volume of over $100m. with one in four properties sold in Jerusalem being bought by a foreign resident and one in two in the center of the capital. "Property prices in Jerusalem have increased to levels of $10,000 per square meter, which are not rational," said Loval. "Foreign residents are likely to wait [to purchase], whereas before they would buy properties in advance before they are ready [to be occupied]." The Central Bureau of Statistics reported this week that new dwellings sold from January to August rose by 2.8% to 9,280 apartments, of which 39% were sold in the center of the country, 26.5% in the Tel Aviv area, 6.8% in the Jerusalem area, and only 4.5% in the North. On the other hand, the strength of the pound sterling and the euro has turned property prices in Israel more attractive for buyers from the UK and France. "French buyers who previously bought apartments for $150,000 in the port city of Ashdod are now able to buy apartments for $200,000 and $250,000," said Haim Kakun, marketing manager at Bonei Hatichon construction company. Meanwhile, the local real estate market is also seeing a sharp rise in Israeli buyers who are taking advantage of the weak US currency, which offers attractive buying opportunity conditions for second-hand apartments. "There is a clear preference on the part of buyers for the acquisition of second-hand over new or first-hand property," said Anglo-Saxon's Schlesinger. In addition, the continued weakness of the US currency has prompted more and more sellers and real estate agencies to advertise property prices in shekels. "If in May only 1% of sellers were advertising their property prices in shekels, today 6% are advertising shekel prices, while 11% advertise prices in shekel and dollar," said Levi Itzhak, editor of Property Prices magazine.

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