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Israel Economists: Interest rates to rise and Dollar to fall

If you are holding US dollars, now might be a good time to invest in Israel Real estate.

Many people are expecting Bank of Israel Governor Stanley Fischer (who is a candidate to be the new head of the IMF) to raise the interest rates gradually throughout the rest of the year. But there was an interesting side point in an article that appeared today in the Jerusalem Post.

Most economists are expecting the official interest rate to rise to 3.25% on Sunday (up .25%). That means mortgage rates will be going up as well. The factors behind the increase are inflationary considerations, rising housing prices, high economic growth and the recent recovery of the dollar against the shekel.

One of the goals is to help slow down the housing market and keep prices in check. However most analysts see price increases.

What got my attention in the article was the following prediction…

“USG Capital analysts Eli Ben- David and Shai Zakhaim predicted that the dollar would return to its downward trend against the shekel after it fell back below the NIS 3.50 threshold early Thursday.

They forecast that the dollar exchange rate would fall to NIS 3.40 within three months and hit NIS 3.30 within six months.”

That means a NIS 2,000,000 apartment today would cost you about US $570,000. Six months from now, the local price will very likely rise to NIS 2,200,000 but since the dollar may lose value, that same apartment could cost US 666,000 – an increase of almost 17%.

Even if the local prices stay the same in shekels, that US $570,000 apartment will cost US$ 606,000 six months from now.

Moral of the story: If you are holding US dollars right now and have been considering purchasing property in Israel, you may want to invest in Israel real estate sooner rather than later.

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