Israeli Real Estate Market Amidst War: A Strategic Opportunity for Foreign Residents
Hi! This week I invited the Attorney Moshe Binyamini.
He will give us some insights and tips on the Real Estate market in Israel.
With the ongoing war and the uncertain security situation in Israel, the landscape of the nation has undergone significant changes. One sector profoundly impacted by this turmoil is the Israeli real estate market, which has experienced disruptions and uncertainty.
The construction industry has been hit hard, with projects halted due to a shortage of workers and key personnel. The market is currently undergoing reassessment as it strives to recover and resume normal operations.
As the fog eventually lifts and normalcy returns, the Israeli real estate market presents a unique opportunity. With the rising antisemitism worldwide, Many Jewish people around the world are now considering purchasing property in Israel, either to make Aliya and establish a life in the country, or as an "insurance policy" for an uncertain future.
Here's 5 pointers you should take in consideration while looking for an apartment in Israel these days:
1. Amidst the high risks and uncertainties associated with a nation at war, there are opportunities for both local and foreign investors to seize. New development projects, previously unavailable, may now offer attractive options such as comfortable payment plans, interest-free payments, and other incentives. These developments may present a unique opportunity to purchase property in Israel at favorable terms.
2. Another critical factor for foreign residents to bear in mind is the prevailing favorable exchange rate between the dollar/Euro and the shekel. The current high ratio presents a distinct advantage for foreign buyers, potentially amplifying the benefits of investing in Israeli real estate. This advantageous exchange rate not only enhances the purchasing power of foreign investors but also opens up unique opportunities for those seeking to make strategic investments in the Israeli property market.
3. The past year witnessed a slowdown in the real estate market, primarily due to the high-interest rates imposed by banks, making mortgage repayments more expensive. However, the last months prior to October 7th events, interest rate hikes were halted and have since been stabilized, possibly paving the way for a reduction in the near future. Experts speculate that a decrease in interest rates may be on the horizon to incentivize real estate purchases and stimulate market growth. Moreover, to further boost the real estate market, interest rate reductions may be employed as a means to encourage investment in this sector and others.
4. As long as the war persists, there will be limited progress in construction, resulting in a reduced supply of housing. This scarcity is likely to drive up real estate prices, as historical data indicates that real estate prices tend to increase after ongoing military operation in Israel. This effect is particularly pronounced for new projects, and as mandated by regulations, these apartments include a standard safe room (Mamad).
5. In terms of taxation for foreign buyers, the current obligation is a purchase tax of 8% based on the apartment's value (up to the initial 5.9 million Shekel, and 10% above it). However, if one decides to make Aliya, a tax benefit is available, entailing a reduced purchase tax of 0.5% (up to the initial 1.9 million Shekel, and 5% above it) for apartments purchased up to one year before the Aliya process. Purchasing after Aliya grants the buyer eligibility for tax brackets applicable to an Israeli resident, which are dramatically lower for a first or lone apartment buyers.
In conclusion, the Israeli real estate market, despite its challenges during times of conflict, presents a promising opportunity for both local and foreign residents. While the situation remains fluid, the potential for a decrease in interest rates and the historical trend of real estate price increases post-conflict make this an appealing time to consider property investment in Israel. With strategic thinking and a long-term perspective, individuals can find value and security in the Israeli real estate market during these uncertain times.
Moshe Binyamini is an Israeli real estate attorney and the owner of a law firm specializing in representing foreign buyers and investors in Israel.
This article serves for informational purposes only and does not constitute legal or financial advice. The author and the law firm assume no liability for the accuracy or completeness of the information provided. Readers are encouraged to consult with qualified professionals for personalized advice, and any actions taken based on the content are at the reader's own risk.
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