The strengthening of the dollar, along with a drop in demand for apartments among local buyers and the beginning of a decline in prices, creates attractive real estate opportunities in the housing market for foreign residents or those whose income is in foreign currency. Real estate agents working with foreign residents report many transactions in the luxury market: “Every dollar is worth much more today”.
The strengthening of the dollar on the one hand, and the drop in demand for apartments among the Israeli public which has led to a decline in prices on the other, create attractive real estate opportunities in the Israeli housing market for buyers who are foreign residents or Israeli residents whose main income and capital is in foreign currency, in particular US dollars. This follows a long period in which this segment of buyers suffered a strong blow, alongside record demand for homes.
Since October 2022, almost an entire year, there has been a significant slowdown in demand for apartments in Israel, with data published every month indicating that the number of transactions is almost 50% lower than last year’s figures. For example, according to the latest figure published by the Central Bureau of Statistics, 2,176 new homes were purchased in Israel in May, compared with 4,257 last year – a decline of 49%. The drop in demand, which came at the height of a huge construction boom, also created an unprecedented supply relative to the Israeli market. As of the end of May, 57,000 new unsold apartments are “on the shelf” waiting for buyers. This represents a 25% jump in the number of new homes offered for sale, which occurred in just a year.
The price indices did not remain indifferent to the sharp decline in demand. For the past two consecutive months, the home price index, which is published every month, has a negative value, indicating a decline of 0.3 percent. The reasons for the slowdown are clear to all—a sharp increase in the interest rate by the Bank of Israel, alongside a global economic crisis that mainly harmed the high-tech industry, which is of particular importance to the Israeli economy. Additionally, the legal reform promoted by the government and the strong protests associated with it has turned many buyers off purchasing for now.
But those who are likely to benefit greatly from this trend are, as stated, foreign residents or those who intend to make aliyah. Alongside the decline in demand, there has also been a significant depreciation of the shekel against the dollar, with the value of one dollar hovering around NIS 3.7 in recent weeks. In August last year, its value was around NIS 3.3. In other words, every million dollars is worth 400,000 shekels more today than it was exactly a year ago.
According to Barak Daon, owner of the Daon Group real estate firm located in central Tel Aviv and concentrating on foreign buyers, the effects of the situation on the purchasing ability of foreign residents are well felt. “There is a decline in Israeli demand in light of the situation, but on the other hand, we feel that there is a wave of immigration today that is reflected in a large number of transactions by foreign residents and new immigrants. If, in normal times, work in the office is divided by 50%-50% between transactions by foreign residents and transactions by Israelis, in 2023 all the deals that our office closed were only those of foreign residents.” According to Daon, the deals have become particularly attractive for foreign residents “not only in light of the situation in which they have no competition with Israeli buyers, but because of the strength of their currency.”
Among the prominent transactions of foreign residents in which his firm was involved, Daon notes a deal for the purchase of a new apartment in a luxury project on prestigious Basel Street in the Old North of Tel Aviv by British clients for NIS 9.1 million, as well as an apartment on Nordau Street, in the same area, which was purchased for NIS 8 million by a buyer from Chicago. A Russian buyer made another deal to purchase a small apartment of about 70 square meters in the Port TLV project near the Tel Aviv Port entertainment area for 7 million Shekels.
If Tel Aviv is considered the second most important focus of interest on the part of foreign residents, Jerusalem has taken the first place in recent years.
According to Alyssa Friedland- Luxury Listing Real estate agent with RE/MAX Vision in Jerusalem, many deals for luxury real estate properties are currently being signed with foreign residents, but unlike Daon, who saw a marked increase, she does not see a significant change compared to last year: “There is a constant demand from foreign buyers in Jerusalem for high-end large properties… but this has not changed over the last few years. The fear of rising antisemitism is one factor, especially among our European and British buyers.”
Among the deals she has brokered in recent months, Friedland notes a number of particularly prominent ones: “I sold a beautiful home in Baka to an American family living in Israel and purchased a single-family home for 30,000,000 NIS about 6 months ago. Another buyer from London bought a small 3-bedroom apartment in Rehavia on Herzog Street for 3,150,000 NIS, fully furnished, and will rent it out for the time being. Another sale was to a French Family who bought a small 3-room apartment in the German Colony on Yotam Street for 3,200,000 NIS for their planned aliyah in a few years.
It cannot be denied that after a long period in which foreign buyers found it difficult to keep up with the ever-increasing prices in the Israeli housing market, conditions have finally changed in their favor. However, there will be those who say that opportunities in the Israeli market today stem from the wrong reasons, chief among them the economic, political, and social difficulties in which the country finds itself, which also affect the strength of the shekel. For those who remain optimistic about the future of the country and its continued prosperity after it emerges from the crisis, this is therefore a window of opportunity that enables the execution of a real estate purchase under optimal conditions.
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