For Israelis, Falling Fortunes

As the dollar plummets, individuals, nonprofits and the real estate market are all feeling the pinch.

Real estate agent Sharon Friedman, co-owner of Arcadia Properties in Jerusalem, says disagreements over the shekel/dollar exchange rate has led to several unpleasant encounters between owners and buyers. Michele Chabin

by Michele Chabin
Israel Correspondent

Jerusalem — A 20-percent hit.
That’s what Israelis living on dollars are struggling to absorb as the dollar continues to plummet against the shekel.
But it’s not only Israelis who have seen the value of their dollar-linked salaries, investments and Social Security checks sink like a stone.
The dollar’s fall — from 4.7 shekels a year and a half ago to 3.6 this week — is also causing harm to nonprofit organizations that rely heavily on dollar donations, and it is torpedoing real estate deals due to disagreements over the exchange rate.
Professor Eliezer Jaffe, co-chairman of the Hebrew University’s Center for the Study of Philanthropy, said nonprofits that depend on American donations to fund projects or programs “are in trouble.”
“Organizations apply for funding

six months to a year ahead of time, and by the time it arrives it’s worth considerably less, even though the donor has fulfilled its commitment. Certain organizations are finding themselves with inadequate funding.”
Jaffe said the dollar’s collapse has affected the Israel Free Loan Society, which he chairs as a volunteer. The society is a lifeline for the many Israeli families unable to afford school tuition, a car, an apartment renovation, a wedding or a medical procedure.
“We administer a major scholarship grant program for an American foundation. Students are supposed to get, say, $5,000 each,” over two semesters. Due to the weak dollar, Jaffe said, “the students weren’t receiving some of the money. Fortunately, when we went back to that foundation they came through with another $40,000.”
Such generosity “is extremely rare,” Jaffe said, quickly adding that the donors who cannot or will not make up the difference “aren’t being mean. They’ve budgeted a certain amount of dollars and may not be able to give anything further.”
The shrinking dollar “is certainly a growing issue, a serious financial issue, yet I don’t think it’s being addressed in American Jewish philanthropy,” agreed Danny Allen, CEO of American Friends of Magen David Adom (MDA), during an interview in Jerusalem. “The dollar/shekel ratio means that our donors may be giving the same amount of dollars but that those dollars don’t go as far to save lives in Israel.”
Hopefully, MDA’s current successful fundraising campaign will make up for most of the shortfall, Allen said, but the NGO (non-governmental organization) needs to increase its funding in order to provide vital services.
“The dollar is weak against the strong shekel and strong Israeli economy, so the question is how to maximize returns from an Israel-based campaign, and second, how to educate American donors about the exchange rate. We’re considering now whether to request allocations in shekels rather than the dollar,” Allen said.
Realtors and mortgage brokers say the majority of sellers are now quoting prices in shekels rather than dollars, a significant departure from what had been the norm for decades. They are doing this to insulate themselves from wild currency fluctuations, which could spell either a windfall or a disaster, depending on what the dollar is trading at on any given day.
Another first, they say, is the fact that many sellers are now basing their asking price on a much higher exchange rate than the one being quoted at the banks — something that is particularly problematic for Americans seeking to buy a home in Israel.
“In Israel, the mortgages are in shekels, but traditionally the buyer and seller would settle on a dollar amount that would be converted into shekels,” an official at a prominent Jerusalem mortgage bank explained. “The amount of shekels paid for a property was determined by the representative exchange rate on the day each payment was made. You never knew exactly how many shekels you would get for your apartment, but the dollar was a lot more steady then.
“Say you want to sell your house today for $300,000,” the official continued. “If the exchange rate is 3.6, as it was this week, you’ll receive 1.08 million shekels. If you charge the same $300,000 and inflate the exchange rate to 4 as some sellers are doing, you’ll receive 1.2 million shekels. That’s an additional $33,000, equaling the number of shekels the seller would have received a few months ago, but it represents a huge price increase if you’re paying in dollars.”
Warren Zauer, a Jerusalem realtor with Tefach.com Realty, recently saw two promising deals fall through due to a disagreement about the shrinking dollar.
“I had one at the point of signature,” said the former South African. “The owner looked around, to see what he could buy for the decreasing number of shekels he would be receiving and came to the conclusion he couldn’t afford anything. The buyer agreed to go up a bit but then the dollar went down again and the seller decided to take the place off the market. In the other case the buyer also raised the dollar price and the buyers fell out.”
Sharon Friedman, co-owner of Arcadia Properties, said “there are a number of areas where the dollar is becoming a big problem.” When rental contracts come up for renegotiation, she says, “owners are either hiking up the dollar amount or pegging the dollar rate to the rate of 4 or even 4.2. When, like now, the rate is 3.6, an apartment that’s $1,000 but linked to a much higher exchange rate is a lot more expensive than $1,000.”
The result, Friedman said, “is a lot of frustrated people. Negotiations are being reopened and there have been a lot of drawn out and difficult arguments.”
While apartment negotiations are an important part of life, the struggling dollar is making it difficult for many Israelis to simply make ends meet.
Standing on line at Cheerfully Changed, a money-changing kiosk utilized by many American expats, yeshiva students and tourists, among others, a 50-something mother of several children admitted she has had to dig into her children’s college fund to pay the monthly bills.
“My husband works for an Israeli subsidiary of an American company and his salary is linked to the dollar,” said the woman — who asked that her name not be used so as not to embarrass her family. “It’s putting us more in debt.”
When asked whether she has had to cut back on any “luxuries,” the woman, who is Orthodox, laughed and shook her head. “We don’t go on vacations or out to dinner or shows. It’s not as if we can cut back on food or school fees,” she said. Frowning, the woman said, “If the dollar doesn’t go up soon, we’re going to be in a lot of trouble.”

Westchester Jewish Conference

Westchester’s Jewish Community Relations Organization