Decrease in the tax on the purchase of real estate


When someone wishes to acquire housing in Israel, he has to organize his budget well because in addition to the price of the housing in question it is also necessary to pay the purchase tax. Prices have increased dramatically in recent years, one reason is that many of the apartments, villas and other properties for sale are bought by investors, foreigners or not.

This is a growing problem over time; also, it is one of the reasons why Elie Cohen, member of the Kulanu party, presented a new project in early January, that would allow banks to dampen their aid to investors. They would give out loans only up to 25% of the price of a dwelling they already have bought, while until now the loans were up to 50% of the purchase price.

Anyone who already owns a home and acquires another is, in fact, an investor.

Investments in the real estate sector have virtually reached the ceiling of the budgets that banks have for this sector, which continue to increase the rates, this in addition to the serious housing crisis that Israel is experiencing today.

If this project were implemented, there would actually be fewer investors in real estate and therefore a greater offer for those who are not yet owners of real estate. This could also lower bank rates for borrowing and help limit investor purchases, thus make it more affordable for others who are not yet owners of an apartment, they could get a bank loan that is today up to 75% of the price of a property.

A new bill has been presented, which proposes that this percentage be raised up to 85% for dwellings whose value does not exceed 1.500.000 shekels, what’s more, for such purchase the buyer will not have to pay a purchase tax since this tax only begins if the purchase price is higher than 1,623,321 shekels.

An excellent idea since one of the biggest problems for Israelis is that they often have enough money to repay a monthly mortgage, but have no money to invest the amount requested as a personal contribution.

Investors, foreign or resident in Israel but wanting to buy property in addition to the ones they already have, must pay 8% purchase tax up to just under 5 million shekels and 10% for more than this amount since the reform of Moshe Kahlon voted in 2015. One should not forget that investors and owners having three apartments or more must pay a multi-apartment tax, which amounts to 1% of the buying price but with a maximum of 18,000 shekels for each property and per year.

However, this law is somewhat not fair, since an owner who has bought his property for 8 million shekels will not pay any tax under this law, but an owner who has a 1 million shekel apartment and wishes to buy two more at the same price for each, will have to pay the tax in question.

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