A foreign resident who was about to close on a deal for the purchase of an apartment in a luxury project in the heart of Tel Aviv for just over $1 million could not believe what he was hearing. Within less than a month the price of the apartment increased by around $200,000.

The salespeople tried in vain to explain to him that, in effect, the shekel price remained the same; the change stemmed entirely from the sharp decline in the dollar exchange rate.

The foreigner, who earns and thinks in dollars, was not appeased and threatened to cancel the deal unless he got a reasonable discount.

At the same time, a dozen kilometers away, an ultra-Orthodox man was threatening to cancel a deal he had signed to purchase a new apartment in Beit Shemesh. The reason: the man, who is supported by charitable funds arriving from the United States, pays in dollars. The fact that the shekel price remained the same did not help at all.

The decline in the dollar exchange rate jointly hurt foreign residents, the ultra-Orthodox and residents of the periphery, who were forced to adapt quickly to the changing reality in order to protect their money. The foreigners, who were about to purchase apartments in luxury projects and pay in dollars, canceled deals or demanded a discount; the ultra-Orthodox who rely on charitable funds, switched to dealing in shekels; and the residents of the periphery, who, in any case, have trouble selling their apartments, had to absorb the difference.

The slide in the dollar exchange rate affected the luxury apartment market more than popularly priced projects," says Avi Gindi, the CEO and one of the controlling shareholders in Gindi Holdings. With luxury apartments, "the impact is especially noticeable when it comes to foreign buyers. The G Tel Aviv project had several deals canceled.

"The dollar exchange rate changed considerably between the date the contract was signed and the registration date and people panicked. Suddenly, they had to add another $200,000 to the price of an apartment." According to Gindi, as a result, many people sought to negotiate and get the price lowered.

"They basically asked to adjust the shekel price to the exchange rate today, and I had to give a discount of some tens of thousands of dollars because they threatened to cancel the deal."

According to Gindi, even Israelis who purchased luxury apartments felt the impact: "The higher the price of the apartment, the greater the corresponding dollar amount that was added. The prices may be listed in shekels but there is a psychological effect. The buyers of an apartment in Ramat Gan in a project of ours knew that the price per room is $115,000. Suddenly, the price jumped to $125,000 or $130,000 and that seemed too much for them.

"They don't take into account that it's the same thing in shekels. To this you have to add the fact that some of them have an apartment to sell in dollars. So the client knows that the new apartment costs $400,000 and the old one is worth $200,000, and suddenly today the new apartment costs $450,000 or $460,000 and the old one is still worth $200,000, so the differential increased.

Pinchas Saltzman, one of the owners of Naot Hapisga, which builds projects for the ultra-Orthodox, agrees that the primary victims in the ultra-Orthodox market are foreign residents: "Foreign residents buy and think in dollars and therefore the drop in the dollar exchange rate raised the list price in dollars, and the blow to them is real. In the local ultra-Orthodox market there was an impact on them also because of the money that arrives from abroad, and in the first months, much confusion was generated. But the market shifted and adjusted itself to the new reality."

Saltzman claims that the ultra-Orthodox world knows how to adapt rapidly to the changing reality. "Look for example, there is a broad spectrum of products with prices listed in dollars such as religious articles and trips to the graves of rabbis and righteous persons. The decline in the dollar exchange rate severely affected dealers and travel agents, and they adjusted the price lists in shekels. A similar process is now underway in the real estate industry. The market in Bnei Brak, for example, is starting to switch over to shekels." "The speed at which this market adopted to the reality in shekels surprised me," adds Saltzman, "I was sure that it wouldn't happen because the money that comes from charitable funds is listed in dollars, but it turns out that in the end, when people's pockets are affected, they know how to react quickly."

And what about the middle class, the market in between the luxury apartments and the periphery? Opinion is divided on this matter. Gindi, for example, argues that in projects away from the center, such as Nes Tziona and Petah Tikvah, the decline in the dollar exchange rate had no particular effect.

"There they don't feel the change because Israelis have learned to recognize the price in shekels," according to him. "There was, however, a sort of natural slowdown until people absorbed the changes, but because the market today works in shekels, and everyone sells in shekels, I assume that slowly but surely people will get accustomed to it and the pace will return to what it was, " says Gindi. " I believe that the pace of sales will straighten out, because there is no alternative. People will realize that they have nothing to wait for because the dollar might continue to decline," he says.

Zohar Levy, the CEO of Ampa, agrees with him and argues that the decline in the dollar rate had a relatively minor impact on the new apartment market: "whoever comes to a site gets the price in shekels to start with and knows that the dollar has no affect," he says, "at the same time, two months ago there was a slowdown because the decline in the dollar exchange rate was dramatic, it dropped steadily and sharply, and psychologically that had an impact. For this reason, several weeks elapsed where it seemed that the market was digesting this and then there really was a little break. In the end, I think that over time, it will not have too much of an impact, we are already sensing that the situation has eased up and I expect that it will continue this way." Yaakov Goncherowsky, the CEO of D. Rothstein, which builds in Netanya, Jerusalem, Petah Tikvah and Be'er Yaakov among other places, is even more decisive about this: "For years we have been selling in shekels and therefore the dollar exchange rate has no impact." Beyond that, Goncherowsky says that in many places in the country, there is a substantial increase in the prices of apartments, and therefore they in any case they became considerably more expensive in dollars, too.

He also argues that there is no problem with buyers looking to upgrade their living quarters. "People earn more money so it's easier for them to buy an apartment. In addition, the price increase is offset by the decline in interest on mortgages, which is even more significant than the decline in the dollar exchange rate." Shimshon Harel, the joint CEO of America Israel, argues that specifically in the satellite cities of Tel Aviv, the impact of the declining dollar exchange rate is apparent: "In a city like Tel Aviv, you don't fell the dollar's affect. However, in Ramat Gan, Petah Tikvah, Rishon Letzion and Holon it's felt more. The low exchange rate stops people and makes them feel pressure, even if it's purely psychological."

According to Harel, the developer, in effect, loses out twice: the building costs grow more expensive and because of the decline in the dollar exchange rate, there is a drop in sales and developers have to offer discounts and absorb the difference.

The CEO of Bonei Hatichon, Ami Peretz, describes an opposite process. Bonei Hatichon builds in Netanya, in Bat Yam along the seafront, and in Rishon Letzion and the Ashkelon marina. Even though the dollar exchange rate is low, the company is arranging numerous deals at its projects. Ostensibly, the increase in dollar prices should be keeping people away for psychological reasons, but that is not happening. People are telling themselves that a low exchange rate is good, and if it goes up then the price of the apartment will also increase. It's a sort of reverse psychology. In any case, all of our sites are selling, and the public is translating the decline in the dollar exchange rate to a low price in shekel rates, despite the fact that the shekel price remains the same as it was.