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The recent plunge in the dollar, which has brought the shekel to a five-year high against the US currency, has increased pressure for a drastic change which would move the local real estate market from one that has been historically dollar-denominated to one delineated by the shekel.
"Over the next few years, we are likely to see a gradual change from a real estate market where prices are close to the dollar rate to one which is denominated in shekel terms - a shift that is already occupying the thinking of the Bank of Israel," Hanan Schlesinger, CEO of the Anglo-Saxon real estate company, told The Jerusalem Post. "Whether the exchange rate is going up or down, there will always be someone losing out. When the man on the street earns in shekels, there is no reason why he should be dependent on fluctuations of foreign currency."
The drop in the dollar of nearly 10 percent in recent weeks and months has shaken the real estate market - particularly sales, but also rentals. A survey conducted over the past three months by Levi Itzhak, the editor of Property Prizes magazine, showed that the continuous weakening of the dollar has led to a preference on the part of buyers for the acquisition of second-hand over new or first-hand property. On the back of a weak US currency in recent weeks, only 8% of property purchases were new dwellings compared with 33% in October 2005, when the dollar exchange rate stood at NIS 4.59.
"The reason for this shift lies in today's par between second-hand property prices, which are sold and bought in dollar terms and new property, where the shekel price has not been adjusted in line with the drop in the dollar," Levi explained.
Meanwhile, the market is also seeing an increase in the activity of Israeli buyers.
"The market at the moment with a weak US currency offers attractive buying conditions for Israelis," said Alyssa Friedland, co-owner of RE/MAX Vision and RE/MAX Capital in Jerusalem.
"There are Israeli buyers who already own a property and are looking to upgrade to a bigger apartment for their family, and tenants who might not have been able to buy earlier and are now considering the dollar difference between paying off a mortgage as opposed to continuing to pay rent."
Friedland added that with the weak dollar potential, buyers today need fewer shekels to get to the buying price, and therefore the loan they need to take out could be between 8 to 10% smaller than previously.
"Another trend we are witnessing is that buyers who bought already are now trying to make early payments," said Moshe Babani, regional sales manager at Anglo-Saxon.
Adversely, property sellers are now stubborn about negotiating the asking price, as was once common place.
"There is barely room for price negotiation as sellers have become very hesitant to move prices down," said Friedland. "We hear sellers complain about all the shekels they have already lost, and some even try to increase prices."
Foreign resident buyers, in particular from the US and the UK, have recently shown much interest in buying a second home in Israel, and more so now.
"They see the dollar plunge and understand the situation to mean that sellers might raise their prices," said Babani.