The IsraTransfer Report: May 2021
In this month's IsraTransfer Report:
From the IsraTransfer Trading Desk: May 2021 Shekel Update
Economic Update: Back to Reality
From the IsraTransfer Trading Desk
This month, the major currencies were 'fairly stable' against the shekel.
There was some movement with the sterling as it dipped below 4.60, but it has since returned to its "happy place" and seems to be staying put for the moment.
Similarly, the US dollar has been relatively stable, although it has dropped to the 3.25 level. It appears to be content there for the time being.
Israel's rapid post-Covid bounceback should have strengthened the shekel. However, the unstable political situation prevented it from climbing higher.
The UK was scheduled to enjoy "Freedom Day", or the easing of Covid restrictions, on June 21. Unfortunately, the new Indian strain is causing problems there and may delay full economic reopening and weaker the sterling.
Economic Update: Back to Reality
With the pandemic woes behind us, Israel is on to dealing with its "regular" problems...like security conflicts, political unrest, and all that fun stuff. But even after fighting an 11-day war and enduring months without a government, the economy is holding tight. Israel was ahead of the game with its speedy vaccination rollout and subsequent economic reopening. The latest reports show unemployment is down to 6.7%, compared to 9.9% in April and 22% in April 2020. The numbers are likely to drop further when Israeli's end their "paid vacations" once extended unemployment benefits end on July 1.
Most countries paid a significant economic toll due to pandemic closures. In Israel, the damage was tempered in part by the thriving tech industry. Israel was subsequently in a better situation than other developed countries, and the economy is expected to grow by 5% this year. The optimistic numbers influenced the Bank of Israel's decision to leave the key lending rate unchanged at 0.1%.
Another development with potential is the new tax treaty between Israel and the United Arab Emirates. The treaty's purpose is to enable the significant promotion of investment and trade that will benefit both countries. The agreement, which prevents double taxation, is hoped to pave the way for more business and quick dividends to help recover losses due to Covid-19.
Real Estate Prices Soar
"What goes up must come down" doesn't seem to apply to real estate in Israel!
Property is in high demand, and there's not much to go around. Raul Srugo, President of the Israel Builders Association explained that demand is high, and the Israel Land Authority isn't releasing enough land for sale. Many land tenders in recent years were designated to the Buyer's Price Program and excluded anyone who didn't qualify. Srugo believes that the crisis will result in an increase of 10%-20% in the price of housing.
But why so many buyers? Investors played a vital role. Since March 2020, investment property purchases in Israel rose by 114%. During unstable times like the covid-19 pandemic, investors tend to focus on stable ventures like property. Add the July 2020 second property tax reduction, and you have a recipe for a home sale spike.
New homebuyers were not just investors. Many Israeli's were looking to upgrade their living situations due to the pandemic-induced new reality. People wanted larger homes with outdoor spaces. An analysis by Israel Hayom's Real Estate Magazine revealed that demand for apartments rose by 43% in 2020. Demand for 7-room apartments grew by 51%, 6-room by 42%, and 5-room by 31%. Requests for 4-5 room apartments were the greatest, accounting for 66% of total apartment searches. Interest in penthouse apartments rose as well. According to Anat Friedman, Marketing and Sales Manager at Metropolis, "The pandemic led to a change in apartment buyer behavior. Staying at home for extended periods of time increased the need for more comfortable, larger, and more pleasant interior and exterior living spaces." This high demand came at a price, and almost all types of apartments across Israel began to climb.
The Tourism Comeback Begins
Tourism begins to show its head and the airlines are paying attention! Although it's just starting to make a comeback, the airline companies believe it will be going strong soon enough. The fact that Israeli's can enter the USA without having to quarantine has been enough to fill the current flights to and from the country.
American Airlines, which hasn't flown to Israel in 5 years, announced new routes just in time for summer travel. In addition to restarting its New York- Tel Aviv line, the airline is launching Miami-Tel Aviv and Dallas-Tel Aviv routes. They also partnered with budget airline JetBlue which will allow for connecting flights from around the United States.
El-Al is stepping up their daily and weekly flights from Tel Aviv to New York, Newark, Miami, and Los Angeles. United Airlines is also increasing the frequency of its flights on Israel - USA routes from 13 weekly flights at present to 24 in the summer. United Airlines is renewing its Tel Aviv - Chicago route and increasing the number of flights from Tel Aviv to New York and San Francisco.
This week, Israel welcomed its first organized tourist group since March 2020. The group consisted of 12 Christian pilgrims who came to study in Israel. It is part of a pilot program in which 20 groups of vaccinated participants will be allowed into the country under close surveillance. If successful, individual travelers could be allowed to start visiting on their own starting July 1.
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In case you missed it...
Israeli woman makes history as she summits Mt. Everest
A 43-year-old woman raised the Israeli flag at the summit of Mount Everest on May 23.
Nothing could stop Danielle Wolfson! The 43-year-old Ramat Gan native endured a major ski accident in 2011. She broke multiple bones in her body and had to learn to walk again. But that didn't stop her from becoming the first Israeli woman to reach Mt. Everest's peak and the 4th Israeli to do so. Read more of her story here!