Real estate news dominated the headlines in the month of January, including a heat-up in the luxury market, and new mortgage taking numbers starting to rise. Plus, the latest on Brexit from the IsraTransfer Trading Desk, and Israel doubles up in the latest Bloomberg Innovation Index.
From the IsraTransfer Currency Trading Desk
The month of January was no friend to the USD/NIS, as the rate retreated off its 3.78 high made back in late December to close the month as the 3.63 level. After a long-run of hawkish monetary policy, the United States FOMC appears to have now acquiesced to the demands of President Trump, and seems to be shifting to a more dovish stance with fewer interest rate hikes going forward. As such, this theoretically should have a weakening effect on US dollar strength. Given that as we mentioned last month with interest rate hikes planned later this year the long-term prospects for the shekel is a stronger currency, and upside in the USD/NIS could be limited from here for a while.
On the Brexit front things are dicier than ever, and for good reason. With the March 29th separation date fast approaching, the urgency for a deal has never been higher as (and as hard it may be to believe) the country has even begun stockpiling food and other essential supplies should the worst come to pass. In a sign that that confidence that a deal can be reached in time is only deteriorating, for the second quarter in a row the UK’s largest banks have been fleeing London as global banks fear the loss of their ability to sell through their services throughout the EU.
From the European Union vantage point the turmoil is certainly having an adverse and impactful effect as well including a downward revision to a paltry 1.4% for its 2019 economic growth. Although France, which handles approximately 60% of all transit of both goods and people from the UK to the EU insists its prepared for a No-Deal Brexit, we won’t know unless we get there. There are no game-changers on the on the economic calendar this week, so all eyes will be on the one to come which will feature Theresa May’s latest Brexit proposal on Wednesday, followed by Parliament’s vote on Thursday. With that in mind, batten down the hatches and expect unpredictable trading in both currencies this week as we find ourselves in the calm before the storm considering the aftermath that ensued following May’s last Brexit Plan.
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Luxury or Necessity?
It may still be seasonally cool in the Holy Land, but Israel’s luxury real estate is certainly heating up. With economic growth on the rise, high-end property, namely in Tel Aviv and Herzliya Pituach, is very much in demand. With Israel’s well-earned reputation of “Startup Nation” (more on that later), more and more uber-successful entrepreneurs are finding themselves with large net worths, and an appetite for new homes to along with them. That, along with a continuation of the upward trend in those making Aliyah have also played a role in the recent property boom.
Unfortunately, however, not all the purchase activity has been motivated by positive news. In a somewhat disturbing developing trend, many of the purchases are reportedly being made as “insurance home” purchases from Jews abroad witnessing an increase in anti-Semitism. At the top of the list are those living in France, as well as those in Ukraine and Russia. In fact, in a recent survey conducted by the European Union, over one third of all European Jews asked indicated an interest in making Aliyah due to hostility towards Jews in those countries.
The luxury real estate deals aren’t the only ones on the rise of late either, as Israel mortgage taking reached its highest levels in three and a half years to close out 2018. After posting results of 7,200 new loans taken in November, the market surged in December by over 15%, coming in at 8,400. In an interesting development, the trend of higher leverage loans looks to be continuing, with one third of all mortgages taken in December being of 60% or larger.
An increase in re-financings including a continuation of the trend in higher leverage loans appears to have been behind the the recent revitalization. Additionally, deals in the Ministry of Finance’s Mechir Lamishtaken (Buyer Fixed Plan) once again also were major contributors behind the revitalization of the mortgage market. The news was certainly a welcome sight in the eyes of both the Central Bureau of Statistics and the Ministry of Finance for what in most respects been a pretty stagnant year in the volume of deals.
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Twice as Good One Year Later
After landing itself in the tenth spot last year on Bloomberg’s Most Innovative Index for 2019, Israel officially moved up into the top five in the latest rankings. An improvement in patent registration was largely responsible for the jump from last year’s ranking that takes into account factors such as R&D spending and public high-tech companies just to name a few. Of the 200 countries evaluated only South Korea, Germany, Switzerland, and Finland found themselves higher up on the list than Israel. To gain some perspective on Israel’s impressive placement on the list, the two world’s largest economies, The United States ranked 8th, and China ranked 16th.
Ok everyone, consider yourself all caught up. Have a very successful and prosperous month!