Mr. and Mrs. “Smith” were all set for their Aliya scheduled for March of 2021. Even with the onset of Corona they were determined to join their two children who were already living in Israel, raising families of their own. Their children had already purchased their own homes in Israel and now it was time for them to do the same. However, they neglected to account for the incredibly declining dollar and the impact it would have on their purchasing power specifically regarding the purchase of a home in Israel.
We first met the “Smiths” via Zoom late last year as they had their eyes set on buying their house in Zichron Yaakov. Buying a home in Zichron would literally be the fulfillment of a lifelong dream of Aliya.
The Declining Dollar
Since March of 2020 when the dollar average dollar to shekel rate held at 3.65 NIS, it has dropped steadily until recently leveling off. After reaching a 25-year low of 3.12, it has climbed back to 3.28. While it does not necessarily impact the average citizen in any discernible fashion, the “Smiths”, and other potential olim interested in the Israeli real estate market were now in a bind.
They had planned to sink most of the $750K from the sale of their Chicago home, into a new home in Israel. However, with the declining dollar, their original budget has shrunk by nearly 10%-15% on a 3M NIS home! They were now close to 400,000 NIS shekels below the total amount they had expected to have on hand to purchase their home.
Dealing with currency fluctuations
While nobody knows how the market will react, there are a few things prospective home buyers can do to try and either hedge or convert their currency when it is most beneficial. Here are a couple of things we at My Israel Property recommend to our clients.
Lock in the rate
Anybody who claims to know what the currency markets will do is probably a charlatan. At My Israel Property we do not claim to know how world politics or socioeconomic forces will impact the dollar-shekel exchange rate. But what we do know is that if a client is dealing with a specific budget range and has a home in mind it is best, they lock into the exchange rate which best suits them. True, it could be transferring their dollar to shekels too early will run them the risk of missing out on a more generous exchange rate, but obviously the reverse is also true.
Lock in your home
Similarly, to locking in the rate, it is also wise to lock in a home. Granted one does not usually spontaneously buy a home in Israel, but if you see something you like, and you are moving, and you have the funds available now, lock in that home while you can.
Seek professional advice
When it comes to the purchase of a home or any “large ticket” item, sometimes it is best to consult with a professional. Perhaps a mortgage broker would tell you to take a bigger mortgage now and lock in a beneficial rate. It is conceivable that there are other assets in your portfolio you can sell to cover the difference as well. The point being, try not looking at your position in terms of just black and white, i.e the dollar is up or down. A professional may have ways to see things in a multi-dimensional perspective.
Buying with confidence
Buying a home in Israel especially for olim, can come with a lot of questions and a lot of uncertainty especially for first time buyers. At My Israel Property, we pride ourselves on guiding you through the entire process from A-Z and helping you avoid some common obstacles such as the fluctuating dollar. So, get in touch with one of our real estate consultants today and buy your home in Zichron Yaakov with confidence!