With many countries experiencing major financial shake-ups, the US dollar – having initially plummeted at the beginning of the global recession – is now seen as one of the world’s strongest currencies and its value has risen dramatically. One year ago, the US dollar was worth 3.4 New Israeli Shekels (or “NIS” or “shekels”); today the same dollar can buy you approximately four shekels, which represents over a 15% increase in value.
What does the dollar’s strength mean to an American who wants to buy an apartment in Israel? Let me explain by way of example: If you wanted to buy a 2,500,000 NIS apartment last year, you would have paid over $735,000. Today, that same 2,500,000 NIS apartment would cost you $625,000! Lest you say, “that’s all well and good, but I’m sure that during the past year, Israel housing prices have gone up, so where is my real savings?” understand that over the past one and a half years, Israel has actually experienced a flat market; prices today are just about the same as they were eighteen months ago.
The stronger dollar has allowed many people who had previously been priced out of the Israeli market to fulfill their dream and purchase apartments. Others who were going to settle for lesser units can now afford an upgrade – be it buying a larger or renovated unit or purchasing in a more fashionable location.
For the past few years, many Americans felt they had “missed the boat” to purchase an apartment in Israel because, unlike the United States which experienced lower housing prices for the past half decade, prices in Israel had risen dramatically from 2007 until early 2011, before softening slightly and stabilizing this past year.
There are many explanations why Israel’s housing prices rose during the early years of the global recession; let’s briefly discuss a few reasons.
First, in contrast to the US housing market which flourished until 2007, the Israeli housing market grew sluggishly from 1999 to 2007, increasing by just 19% during this time period. Therefore, the subsequent five years of rising prices were a “correction” period, allowing Israel’s real estate market to catch up to the rest of the country’s booming economy.
Second, during the depths of the global financial crisis, Israel’s unemployment rate capped at 8% and quickly returned to under 6.5%, reflecting a robust and dynamic economy – as opposed to many other countries whose unemployment rates spiked above 10% and still remain high. Thanks to Israel’s resilient economy, despite economic struggles abroad, its real estate market flourished.
Third, Israel’s supply of new homes for sale had fallen steadily from 2006 to 2010, from around 14,000 homes at the beginning of 2006 to just over 9,000 at the end of July 2010. This relatively small inventory of new housing created a sustained level of demand, translating into higher apartment prices.
Bottom line: In spite of Israel’s housing price increases from 2007 until early 2011, today’s strong US dollar coupled with Israel’s softer real estate market have created the “perfect storm” for Americans to buy apartments in Israel at excellent prices.
Gedaliah Borvick is the founder of My Israel Home, a real estate agency focused on helping people from abroad buy and sell homes in Israel. You may contact him at gborvick@gmail.com.