Stronger shekel reshapes housing market as foreign buyers lose purchasing power

For years, foreign buyers helped fuel Israel’s booming real estate market, particularly in Jerusalem and Tel Aviv, often paying in US dollars while benefiting from a relatively weak shekel.

Now, with the Israeli currency having strengthened sharply against the dollar in recent months, the equation has flipped, real estate agents tell The Times of Israel.

Foreign conversion rates for the Israeli currency, which currently trades at around NIS 3 to the dollar, are forcing buyers to consider new financing options, look to buying “on paper” in new projects, or in some cases, downgrade their expectations and buy less expensive homes, agents say.

“The irony is that a lot of the reason market prices got so high is because of foreigners who came because of the weak shekel in past years,” said Yitzchak Kowalsky, CEO of YKK Jerusalem Real Estate. “Now, we’re seeing for the first time in years that Israeli clients can actually compete with foreign buyers.”

The Israeli currency is about 10 percent stronger than it was a year ago, and has fluctuated by more than 20% over the past 16 months, trading data shows.

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A year ago this week, the shekel traded at NIS 3.37 to the dollar, compared to NIS 3.00 today. It reached as strong as NIS 2.80 against the dollar on May 29, after trading at NIS 3.74 14 months earlier on April 5, 2025.

The strength of the shekel means that while interest from foreign buyers is still high, their dollars, pounds and euros don’t go as far as they used to, with the cost of homes rising by hundreds of thousands in some cases when exchanging currencies.

Kowalsky recalled one client who had transferred dollars to Israel for his home purchase and recently forced to put up an extra NIS 200,000 ($66,572) to make up for the difference.

“It’s a good thing he had the money,” Kowalsky said. “What about all the people who can’t do that?”

The recent strength of the shekel has been rewriting the rules of Israel’s housing market, adding a new layer of uncertainty to a sector that has been looking to recover from more than two and a half years of security-related challenges, real estate agents say.

“The conversation has changed, but the demand hasn’t disappeared,” said Noah Sander, a real estate adviser and founder of Zionistinvestor.com. “I haven’t had a single client tell me they’re no longer buying because of the exchange rate. They’re just looking at different products.”

The shekel’s strength is the latest in a string of recent challenges to Israel’s real estate market. Once red-hot, the market has slowed in recent years as interest rates rose from near-zero levels, supply reached record levels, and Israel’s wars in Gaza, Lebanon, and Iran hampered market visibility.

Interest from foreign buyers remains high, however, as Jews from abroad increasingly seek a foothold in Israel to escape from rising antisemitism, agents said.

“Three years ago, everything was selling,” Sander said. “Then interest rates rose, then the war came. It didn’t stop people from buying, but it made their decision-making processes more complicated.”

Boosting new projects

The strong shekel has affected buying patterns in surprising ways, Sander said. One is the increased demand for new projects on paper, at the expense of secondhand apartments currently available.

Many developers offer attractive financing packages for new homes in which buyers can pay only 10% or 15% of the price of an apartment up front, with the balance due several years later when the keys are delivered. This allows buyers to delay converting dollars into shekels in the hope that exchange rates become more favorable.

“Nobody is worried that the dollar will stay where it is forever,” Sander said. “The market is generally confident that the shekel will recover [from being too strong], and people think they can buy themselves a few more years by spreading out payments.”

That has made new construction much more desirable than older apartments, for many, Sander said. In Tel Aviv and the surrounding cities, prices for secondhand properties have fallen roughly 20% in recent years, he said.

“I think this price gap between new and secondhand properties will continue to grow,” Sander said. “People don’t see value anymore in buying an apartment in an old building with no elevator and no shelter from missiles. Old apartments are losing their value quickly.”

Urban renewal projects can help a building retain its value, but as market demand weakens, buyers have learned to see little value in plans for TAMA 38 renovations in a building until construction actually begins, Sander said.

Developers for the TAMA 38 projects generally need to show the banks that they have sold a certain number of apartments at the price they are asking to get the loans they need, Sander explained. If they can’t get the loan, the project can fall through, something that has become increasingly common as demand falters.

“That means that even if you get a building permit, it doesn’t really mean anything anymore until work actually starts,” he said.

Adapting to expectations

Meanwhile, speculative buyers have a few options to try to time the market and wait until the shekel weakens.

Banks have become increasingly flexible in structuring loans that allow buyers to temporarily pledge dollar deposits as collateral while borrowing in shekels, said Norman Shapiro, senior mortgage broker at First Israel Mortgages.

That means a buyer transferring, say, $500,000 from abroad could decide to keep some of their dollars intact while borrowing the equivalent amount in shekels. Assuming the shekel weakens in the coming months, that could lead to significant savings even after paying interest on the loan, Shapiro said.

“This allows people to avoid converting their dollars to shekels now, in the expectation that the interest of the exchange rate will improve in their favor over the next six months to a year,” he explained. “I don’t have any inside information, but there seems to be a general consensus among buyers that the shekel is going to weaken against the dollar.” (Buyers are advised not to take this as financial advice, and to make their own decisions with the help of a qualified adviser.)

Many buyers, meanwhile, are concluding that they have to scale down their expectations to adapt to the new conditions.

Some are finding that a budget that once covered a spacious three-bedroom apartment in Tel Aviv or Jerusalem may now translate into a smaller unit, a less central location, or a project further from completion, agents said.

“People are coming in with the same budget mindset they had two or three years ago,” said Kowalsky. “But when they see what that actually buys today, they realize they have to choose between stretching themselves financially or compromising on size, location, or finish.”

That means some buyers are shifting from established neighborhoods to emerging areas where prices remain lower, or choosing compact new-build apartments instead of larger secondhand homes. It may be a painful compromise, but after years of disappointment waiting for prices to fall, many buyers are choosing to jump in now rather than continue to wait.

“We’re seeing more people say, ‘Let’s just get in now,’” Sander said. “They’d rather own something here, even if it’s not their ideal home, than wait and risk being priced out further.”

Still others seek to own something in Israel now due to growing antisemitism in Jewish communities around the world that is forcing people to ask uncomfortable questions about their futures.

“People are having conversations about what their ‘plan B’ is if they have to leave the Diaspora,” Shapiro said. “That fear is driving a lot of interest in the market here, even if it isn’t translating yet into huge buying frenzies.”

For now, the market remains slow, with Israelis cautious after months of reserve duty, economic uncertainty and elevated borrowing costs.

“There are certainly people waiting for the war to finally be over,” Sander said. “But the people who are serious are still doing deals. They’re just doing them differently.”