Foreign Real Estate Investors Where Are You?

world currenciesI remember a time when the prices of second hand apartments were always linked to the U.S. dollar.  This was because the Israeli currency was always sliding against the U.S. dollar and other currencies.  This made the purchase of apartments by foreigners a lucrative deal for them and for Israelis selling apartments.  It went like this: in the sale of an apartment the price was paid in Israeli currency but the price was quoted in the contract in U.S. dollars .  The shekel amount to be paid was calculated at the representative rate of exchange published by the bank of Israel on the date of the actual payment.  If the U.S. dollar rose against the Israeli currency then the Israeli seller got more NIS for his apartment.  The foreign investor was not affected by this as he held U.S. dollars. This system made it difficult for Israelis, holding NIS, purchasing a second hand apartment where the price was linked to the U.S. dollars (which was always the case). It meant that they could never know in advance how much the apartment would cost them in NIS since the rate of exchange was always fluctuating.

However, in the summer of 2006 the Israeli NIS began to strengthen against the U.S. dollar and other currencies. For the first time people began to do sales agreements that were not linked to the U.S. dollar.  The prices and payments in the contracts were set out in NIS and not dollars and they were not linked to the dollar.  They were not linked to anything.  This means that the price in shekels stayed constant. This was good for Israelis holding NIS but very bad for foreigners holding foreign currency whose currencies were falling against the Israeli NIS.

In the past few weeks we have seen a strengthening of the U.S. dollar, the Euro and British pound against the Israeli NIS.  Right now, until the Israeli sellers wake up to this new trend (should it continue) a foreign purchaser can save a lot of money on the purchase of real estate in Israel. The shekel price may stay the same but If the foreign purchaser’s foreign currency has strengthened then the apartment will cost this purchaser less money by the end of the deal.

So see this as a call to action to all foreign purchasers.  Now is a good time to invest in the Holy Land.