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Israel Real Estate Trends

Despite the fact that over the past few decades, many of our compatriots have moved to Israel for permanent residence, the situation on the local real estate market is still not very clear – they rarely write about details.
Real estate in Israel costs impressive amounts – this is often forgotten when ratings are made for the most expensive square meters in the world. At the same time, even though Israel is participating in hostilities – in connection with which the local real estate market periodically changes from a dynamic state to a slow one, this does not prevent the country’s government from systematically investing in the development of all areas of the state, both for local residents and tourists.

For example, this year, another international airport is planned to be opened in the popular Eilat seaside resort for tourists from around the world, new housing is being actively built in the country, hotels of international chains are opening, etc. That is, we can confidently say that military conflicts do not affect the real estate market in Israel. The volume of transactions may be temporarily reduced, but this does not affect the price now and has never really affected it.

Innovations in Israel

What has changed in Israel over the past few years in real estate? First of all, the purchase tax increased in the country: instead of 6%, now the buyer of local housing will have to pay 8% of the value of the property. And when transferring funds for real estate, banks began to very carefully check their origin – this is especially carefully done in large transactions. Now, homebuyers in Israel need to prove that the money is honestly earned and all taxes paid on it. If the funds were inherited, then it is also necessary to confirm this as much as possible.

Recently, the State of Israel has also introduced a tax system for rental. The innovation distinguishes two options: when it comes to the commissioning of one object or business. If you do not go into details, then if the rental income does not exceed 5000 shekels net (after deducting all maintenance costs, depreciation of the property, etc., then you do not need to pay tax. If the rental income is within 10,000 shekels, it is possible to partially exempt from tax, which is 31%.

There is another option – the payment of 10% of income tax on gross income. Usually he is paired in case of renting investment apartments. Here the layout is as follows: if the number of apartments exceeds two objects, then the owner must pay 120,000 shekels a year for a third apartment, 220,000 shekels for a fourth, and 370,000 shekels for a fifth. Then, for each additional apartment, another 15 shekels are paid.

The last two trends have certainly affected the volume of purchases. Moreover, an increased audit of funds somewhat reduced interest among non-residents of Israel. And the tax on investment apartments affected the decrease in the number of transactions both among foreign investors and among the local population. As a result, we can now observe a trend towards lower housing prices, including in the secondary market.

Israel: traded or not?

It is supported by one interesting indicator: the number of real estate sellers is ready to lower the asking price in order to close the deal. In less popular areas, homeowners make discounts as expected more often than they do on the popular housing market. True, experts believe that fundamentally real estate prices in Israel are not falling, explaining this by the fact that this topic has been actively and long discussed in various media, including the Israeli ones, but growth cannot continue continuously. Even taking into account the fact that sales, especially in the elite real estate market, are not as active as before – prices are and are not going anywhere. Therefore, attempts, in particular by Russian buyers, to popularize the topic of stagnation in order to significantly bargain for housing, do not lead to success.

Israel is a pragmatic country

In the fall of 2018, there was a message on the Internet that the Airbnb resource removed offers for rental housing from Israelis in the West Bank, to which the Israeli Minister of Tourism responded with an order to limit the operation of the resource. However, inside Israel itself, this went completely unnoticed, and besides, even if this had a place to be, it would never become a big problem: there is no given resource, but there are always others. In this regard, Israel is a very pragmatic country. And given that everyone who can (and there are a sufficient number of such people in Israel) are trying to rent out their real estate, and there are many of them, then no restrictions on the Internet and other resources can affect the owners of real estate.

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