Our Guide To Buying A Home In Israel
For many, being able to buy a home in Israel is a dream come true. Buying a home, in general, is a major financial purchase which often requires years of savings. Anyone buying a home is going to invest a great deal of time researching the market, searching for the perfect property, and gaining a clear understanding of the home they are purchasing. After all, buying a home is far from a small feat. But when it comes to buying a home in a foreign country like Israel, many are lost. The market is more complex, the rules are different, and the process is often convoluted. In this blog post, we’ll navigate the Israeli real estate market, help you understand how to purchase property in Israel, guide you through the purchasing process, and hopefully help you fulfill your dream of finally building a home in the Jewish State of Israel.
Can Foreigners Buy Property In Israel?
Israel is a country of immigrants. Every year thousands of Jews make Aliyah (immigrate to) to the land of Israel. As the prophets envisioned, the Jews are slowly returning to the promised land. But as they return, they are looking ahead to buy property to establish their future homes. And the question many are asking is can they even purchase property in Israel if they are a foreigner? In short, the answer is yes. Whether you are Israeli, American, British, Jewish, or Non-Jewish, anyone can purchase property in Israel. However, being an Israeli citizen puts you in a different tax bracket. Israeli residents pay 0% tax up to a value of NIS 1.6 million, 5% up to the value of NIS 5 million. 8% up to the value of approximately NIS 17 million. and 10% over anything more. Foreigners have to pay 8% for anything up to NIS 5 million. and 10% on any value above. And when you’re dealing with some pretty high property costs, that can be a significant difference. Our recommendation? Make Aliyah! Israel is a pretty incredible place to live.
Housing Prices in Israel & Where To Buy Property?
Before you begin buying a property in Israel, you need to decide where in the country you want to live. There is a vast price difference in the price of the property depending on what city you live and even what neighborhood you choose. Big cities like Jerusalem & Tel Aviv are far more expensive. After all, they have the convenience of being closer to supermarkets, restaurants, schools, synagogues, doctors’ offices, and likely wherever you will be working. You will have more options for things to do and the choice of different communities to be a part of, but you also have to pay a higher price for it. The farther the area is from any of the major cities and the smaller it is, the less property will likely cost. Often Israelis are on the lookout for the ‘next big city’ for this very reason. They hope they can buy for cheap in an area that will grow and develop into a place that will one day have all the benefits of city life. Prices for property in the Judea Samaria region, Moshavim & Kibbutzim also tend to be cheaper, but each comes with their own downsides as well. According to the most recent 2020 data, the average price per meter in the city is 26,306 shekels vs 19,530 outside the city. Cities like Tel Aviv, Jerusalem & Netanya will be significantly above average, while other cities like Katzrin, Arad, and Beer Sheva will be below it. In addition to price, there are a lot of other factors to consider. If you’re a foreigner for example, you may want to think about moving to an area that has a significant number of olim (immigrants to Israel). If you are a religious Jew, you may also want to find a community that reflects your religious beliefs. Buying a property is a major ordeal, so before you make your purchase, decide where you want to live.
Buying A House or an Apartment In Israel
Now that you understand who can buy property in Israel, the different tax brackets, housing prices in different areas of the country, and have decided where you want to live, we can now guide you through actually buying the property in Israel. The process is in many ways different from the States or the UK, and we’ll walk you through some of the most important information to be aware of.
- Negotiation – In Israel, nobody pays the asking price of the property. Sellers are anticipating buyers to negotiate the price and even set their ask higher than they expect to get. This is very different from buying a property in other parts of the world. Our recommendation is to research the cost of similar apartments in the area compared to yours. Ask friends and family and see what makes sense. At the same time though, houses and apartments do go quickly in Israel, so if you aren’t willing to come to an agreement with the seller in a fair amount of time, you may lose the property to someone else!
- Mortgage – If you are like most, you will likely not be paying the full cost for your property upfront. And in Israel, just like most other countries, you can take a mortgage to slowly pay off the cost of your home in the upcoming years. While the mortgage you receive can vary depending on your bank, your financial history, and your income, mortgages tend to be a lot lower compared to the US and you will have to put a significant amount towards a downpayment. Generally, Israeli banks will loan you anywhere from 60% – 85%. Additionally, improving your property, adding on to it, or renovating it can significantly change your mortgage as well. Our recommendation would be to meet with a mortgage consultant. The process can be pretty tricky and there are a number of factors involved.
- Tax Payments – In Israel, you need to be aware of numerous different property taxes. For example, property buyers should be aware of the Mas Rechisa. This is a property tax that changes significantly with the cost of your apartment. It also has to be paid within the first 50 days from the signing of the contract. It’s important to be aware of how much yours is and to pay it on time. Other taxes include Arnona (city tax) and Vaad Bayit (building/property tax). Depending on where you live, these costs can vary as well. You should note that if you plan to rent out your property, these costs fall on the renter.
- Other Fees – In Israel, many apartments are sold through an agent, and they usually require a fee of about 1.5-2% commission of the purchase price. If you are buying the property from a kablan (developer) you are usually required to pay approximately 1.5% for the developers’ cost. You will also most likely need the guidance of a property lawyer to help you navigate all the contractual details and they will charge anywhere between 0.5-1.5% of the property value. In addition to all of these costs, there may be a number of other fees to consider, including property inspection costs, charges when transferring foreign currency, Nasach Tabu (land ownership rights), and homeowners’ insurance. Our goal here is not to cover all the fees in-depth, but to help you be aware of costs associated with purchasing a property in Israel.
Feeling At Home In Israel
There are a lot of complexities to buying a home in Israel. There are numerous factors and variables to consider ranging from location, community, buying property as a citizen versus as a foreigner, taxes, legal fees, mortgage rates and so much more. We hope now you are at least aware of some of the complexities you will have to consider, and we recommend working with the experts to help guide you through the details of your specific circumstances. In our opinion, it’s important to work with someone you can trust and feel at ease with. At ASDEN for example, we help foreigners and olim alike find their new home. We also work with top market leaders and innovative interior designers to not only help you purchase your new home, but make you feel like you ARE home. What’s most important when all the fees, taxes, and legalities are finished, is that you are happy with the home you have built for yourself. You should be happy and feel comfortable in the new place you now call home. Because after all, there really isn’t any place like home.