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(photo credit: Ariel Jerozolimski)
The continued weakness of the US currency coupled with low interest rate has raised the buying power of Israelis across the country who previously were unable to afford the purchase of an apartment.
"Israelis are waking up to the possibility of smaller mortgages and a weak US currency, opening a window of opportunity for them to get out of their rental situation and being able to qualify for a mortgage to buy an apartment," said Alyssa Friedland, co-owner of RE/MAX Vision and RE/MAX Capital in Jerusalem. "Following the end of the season of foreign buyers, there is high demand from young Israeli couples and families, who are looking into the market for three to four bedroom apartments."
There was growing demand, she noted, for less pricy areas of Jerusalem such as Ramat Eshkol, Kiryat Yovel and particularly Arnona, which she called up and coming.
Similarly, Ilan Artzi, head of investment at Direct Investment House noted that the ongoing plunge in the US dollar, which has brought the shekel to a five-year high, was affecting the real estate market from two sides.
"On the one hand, lower interest rates, which are sending mortgage rates to historical lows of around 4.2 percent coupled with the weakening dollar have led to an increase of sales of second-hand properties, which are priced in dollars but paid in shekels," said Artzi. "On the other hand, the sales of new dwellings, which are priced in shekels has been slowing down."
Sarit Saban-Shalit, vice-president of marketing at Delek Real Estate, pointed out that the property market was under a certain distortion.
"As the dollar is weakening, the prices of new dwellings are going up, while the prices of second-home properties are coming down, which in turn has led to a certain panic. But in the long-term, there will be a correction and second-hand property prices will go up."
Artzi predicted that property prices, in particular in high demand areas such as Tel Aviv, Rishon Lezion and Ziona, will increase by 5% to 10 % over the next few months.
"After a continued period of a weak US currency, buyers and sellers start to understand that the odds that the dollar-shekel exchange rate will soon be back to a level of NIS 4.50 or NIS 4.70 are very low and therefore they are starting to adjust prices by raising dollar delineated second-hand property prices," said Hanan Schlesinger, CEO of Anglo-Saxon real estate company.
Schlesinger added that the more the market is influenced and distorted by currency fluctuations, the faster we will see a gradual change from a real estate market where prices are close to the dollar rate to one which is denominated only in shekel terms.
"I believe that in the long-run, this will turn into a shekel traded market to minimize the exposure to currency fluctuations," said Artzi. "We can already see such a trend in the commercial property market."
In a recent interview with The Jerusalem Post, Bank of Israel Governor Stanley Fischer noted that many individuals who specified prices of housing contracts and rental housing in dollars had lost quite a bit since the dollar's sharp decline began in February.
"If people realize they're just as likely to lose as gain by specifying in dollars, it [the practice of pricing property in dollars] will begin to change," said Fischer. "We had a discussion on this and it always gets down to people who want to use legislation vs. people who don't. The other approach is that eventually it [the practice] will go away if the shekel continues to demonstrate its stability which it's doing now."