Is Investing in Israel Only for the Rich?

We’ve all heard that property values are high in Israel, with various areas being called the “new San Francisco” and the like. Because of such perceptions, many people believe that real estate investment in Israel is outside their reach and only for large-scale international investors. But nothing could be further from the truth. Making a real estate purchase in the state of Israel can be a safe and economically sound investment for individuals – Israeli or foreign -- at more moderate income levels. Whether you are interested in obtaining real estate assets in Israel as a financial investment or as a future home, you would be hard pressed to pick a better time or location. Following are just a few of the reasons: 1. Israel’s tax laws are generally favorable to property owners. a. Capital gains. In Israel, most properties are exempt from capital gains taxes when they are sold. If the capital gains are taxable, any net gain is taxed at only the standard income tax rates. b. Inheritance taxes. The state of Israel has no inheritance tax. c. Rental income. While rental income is taxed, taxpayers can opt for either a flat 10% tax on their gross rents or progressive income tax rates for net income. d. Property taxes. Israel does not levy property taxes. e. Other tax breaks. Buyers can receive tax breaks of up to $360,000 on their purchase of a first property in Israel. Tax breaks can also apply to leases at monthly rentals of $1,300 and above. 2. Property is a secure investment in Israel. a. Strength of economy. Israel’s overall economy is strong today. At a microeconomic level, the country’s mortgage system is considered quite sound. Experts predict that Israel will become a true economic powerhouse in the next decade, and it is already a leading technological capital. b. Legal certainty. For investors in rental property, Israel offers a level of legal certainty superior to most countries. Rental contracts are per year usually, with the landlord having excellent legal tools for enforcing immediate eviction of a tenant when breach of contract occurs. c. Low loss risk. There is a low risk of a loss of value in real estate assets in Israel. Prices seldom drop, as those already in the market generally try to maintain the highest quality housing. Supply vs. demand (see below) also works to reduce the risk of loss. 3. “Supply and demand” principles work in a property owner’s favor. a. Low supply. A housing shortage impacts many areas of the country. Overall, Israel has only 105 housing units per 100 households, one of the lowest ratios in the developed world. A lack of available land and lengthy processes for construction approval also put strains on the supply side. b. High demand. High birth and immigration rates create a large demand for Israeli real estate. The large number of students who come to Israel from all over the world to study creates a high demand for apartments near campus areas. c. Positive impact. Real estate properties in Israel are easily re-sellable or rentable. It is rare to find an investor property sitting empty. Monthly rental rates are also highly competitive. With proper bank leveraging, owners of rental properties can achieve return rates of over 12% of a property’s net worth from renting an apartment. 4. Purchasing property in Israel can be much more than a financial investment. For individuals around the world, it represents a stake in a unique country’s future – a retirement in the homeland, an opportunity to settle in a cultural and technological center, the chance to join loved ones. Now is the perfect time for investment. It is predicted that real estate prices will sky-rocket over the next few years as Israel’s young population ages. Approximately 45% of the country’s population is under the age of 25 – a percentage much higher than anywhere else in the western world. The implications of this fact are obvious: almost half of the current population of Israel will soon be entering the cycle of getting married, having children, and acquiring housing. If current housing shortages continue, real estate prices may climb to unheard-of heights. For all these reasons, we encourage you to get more information today on investing in Israeli real estate.