For the first time in four years it looks like there is a reason for prices to drop in the attractive Israeli real estate market.

The spacious Jerusalem home in a quiet, residential part of the city was tagged at $880,000. The buyer, a Californian resident, considered it a bit expensive but thought it was a lovely home that suited his family’s needs. The real estate agent was about to make a deal when the bombshell fell. The seller linked the property to the rate of 4.0 shekels to the dollar. 

On the day the property was presented to the buyer, the exchange rate stood at 3.70, meaning that the property should have been sold for 3,256,000 NIS. Linking the dollar to 4.0 shekels brought the price of the property up to 3,520,000 NIS . That means that for the buyer to come up with 3,520,000 NIS, he would have had to add $71,000 to reach the cost of the property, $951,000. The seller would not budge, and by the time the attempts of the agent were exhausted to make the deal happen, the rate dropped even further and hiked the dollar value of the home to $960,000.  This price was too much for the buyer, and the deal fell through.

For the first time in four years it looks like there is a reason for prices to drop in the attractive Israeli real estate market. The main culprit is the low dollar. Foreign buyers from the US may be deterred from buying due to the combination of high prices and a weak dollar. Add to that the real estate decline in America which prevents buyers from selling their American properties in order to purchase expensive Israeli homes. The real estate decline in the USA may also tempt American investors to redirect their interests from properties in Israel to the American housing market, where properties are relatively cheaper and long term profits are almost guaranteed.

The low dollar will not only stop Americans from buying, but it will daunt Israelis from buying as well. Sellers remember the “good old days” when the exchange rate was 4.20 and even 4.50 so they will demand that their price be linked to at least a 4.0 exchange rate. Buyers don’t care about what they consider ancient history; they want the price to be linked to the current exchange rate. Deadlock! So until this impasse will be resolved, the direction of the market will be uncertain.

Baruch Finkelstein is an owner/broker of Remax Center in Jerusalem. The office is in the shopping center of Ramot and Baruch has agents that service all of Jerusalem.

cell: 972-545-251-219

office: 972-2-586-9980

[email protected]

www.remax-israel.com/center