Updated: Feb 14, 2019
The summer temperature wasn’t the only thing rising in Israel during August as the shekel-US dollar exchange rate heated back up with a climb over the 3.60 mark for the first time in two months.
However, while the Sha’ar Yatzig against the US dollar may have regained momentum, new data suggests an easing of Israel’s home market. While on the surface it may sound like a cloudy forecast, the silver lining may mean great buying opportunities for first-time home buyers – especially with new lotteries for buyer fixed homes on their way. Plus, sunny new tax laws for foreign investors, and a more progress is made on the Tel Aviv-Jerusalem rail link project.
From the IsraTransfer Trading Desk
Highlighting last week in the currency markets was the US job data released on Friday showing a rise in the unemployment rate and fewer jobs being created. Not surprisingly, this was not so positive for the shekel/US dollar exchange rate, following a week-long trading range between 3.57 and 3.59. While this less-than-stellar news pushed the rate a little lower, it did, however, rebound quickly back to its recent trading range. Going forward the main news to be monitored will be developments regarding North Korea. Tensions have begun to escalate again, and if they were to get even more serious this week we maysee the US dollar vs shekel rate climb as more money is moved to the widely considered ‘safe haven’ of currency, the US dollar.
In the UK, Brexit is working its way back to the top of the agenda and last week was the start of what looks like being a very drawn out process. Both sides of the negotiations are complaining about the lack of progress, and there is no doubt Brexit will be the biggest mover of sterling over the upcoming months. It should be noted, that while those looking at the recent performance of sterling against the shekel have been happy with its rate staying above 4.6, it has been conspicuously very soft against most other currencies in the last week.Elsewhere, the Canadian dollar has been the star performer over the past seven trading days as the markets are of the belief that there is a 50% chance interest rates will be hiked on Wednesday. This marks a departure from the market’s previous prediction of a rate hike in October, and follows on from July when we saw the first hike in interest rates for seven years in Canada. Currently, the Canadian dollar is now at the highest rate it has been for 2 years against the US dollar, and against the shekel we are also seeing the best rates since January.
Israel Economy Snapshot
The Israel economy picked up steam the second quarter with GDP growth at a 2.7% annual rate in the period, compared with just 0.6% in the first quarter. An increase in investment by business led the way after two quarters of declines. In shekel trading, an unexpected decline in Israel’s Consumer Price Index coupled with predictions that Bank of Israel’s interest rate will remain low well into 2018 contributed to a weakening in the currency for the month of August. However, despite the decline Deutsche Bank still considers the shekel one of the world’s most attractive currencies for investors over the long term.
First time buyers of homes in Israel may want to take note of the State of Israel’s “Occupant Price Program.” The initiative, designed to make it easier for people to buy a first apartment in Israel at preferred rates saw overwhelming demand in its latest lottery for the 15,000 discount housing units in 24 communities around Israel. Per the Ministry of Finance’s, Moshe Kahlon, “thousands of new homes are now in construction,” with the winners of the next lottery’s 15,000 units expected to be announced on September 15th. More lotteries are on the docket going forward, and the opening dates for upcoming submissions can be tracked using the “project status” drop-down filter on the program’s official website. Good luck!
Israeli Tax Special
Good news for Israelis investing in the United States, as in a precedent-setting ruling recently issued by the US tax court changing the way foreigners are taxed in the US. Per the ruling, foreigners involved in business or investment activity in the US through a partnership can sell their share of the partnership without paying US capital gains tax, with a special exception for cases where the partnership is involved in real estate activity in the US (FIRPTA). The decision could have implications for Israeli residents with some presence in the US, including US tax on bonuses, estate tax, and others, so checking with your tax adviser is highly recommended.
And In Other Transfer News…
The much anticipated high speed train between Tel Aviv and Jerusalem keeps on chugging along with the recent completion of its first trial run. The aims of the test were to check the sturdiness of the new bridges and to tighten and set the tracks in place. A series of more trials are scheduled over the next few weeks, and a completion date for the estimated 28 minute route between the two cities is currently on track for an April 2018 completion.