Recent Israeli initiatives make it more difficult for Diaspora Jews to purchase property in Israel.
Photo Credit: PR
“Through the years, Israel has encouraged immigration,” Yafa Sadan related. “The invitation to immigrate was manifest in many ways, among which was a tax break for buyers of residences in Israel. But now, tax constraints and complex bureaucracy are posing obstacles to and preventing immigration. There are no more tax breaks and today’s situation is a far cry from the essence of the Law of Return and Israel’s status as a state for all Jews.”
These are the words of VP for Marketing at the Yosi Avrahami Company, Yafa Sadan. Sadan refers to countless restrictions imposed mostly in the last two years on purchases foreign residents make of property in Israel. Among them are the cancelation of the exemption from purchase tax for foreign residents, even if that apartment is the person’s first. The implementation of this policy renders the tax status of a foreign resident identical to a resident in terms of purchase tax: 8% of purchase value of to NIS 4.89 million and 10% on any amount beyond that threshold.
Photo Credit: PR
This tax measure, though a deterrent to some degree, pales in comparison to the much greater threat to foreign residents from oversight of the Anti-Money-Laundering Authority. In the last year, the Authority has launched an unprecedented assault on foreign residents or returning Israelis in an effort to reduce money laundering and cut down on tax evasion. The implications of this policy mean that it is no longer a simple act to transfer money to Israel and any unreported amount is immediately suspected as money-laundering and stopped.
These restrictions add to an increasing trend of price increases for apartments in Israel and the strengthening of the shekel as the dollar and euro weaken. “If in the past $350,000 was enough for foreign residents, mostly from Europe, to buy a luxury apartment in Tel Aviv or Jerusalem, today that amount will buy a place in Haifa with a sea view,” explained Sadan. “It is hard for foreign residents to manage financially when they consider buying an Israeli apartment. From the moment a contract is signed, for the receipt of payment, it can take three or four months. If once upon a time banks would provide 90% of the financing as a mortgage, you’re lucky to get 50% today. The whole process of transferring funds involves reams of draining paperwork so dispiriting that many people will simply decide to invest their capital elsewhere.”
Bank of Israel statistics indicate that land purchases by foreigners in the second quarter of 2016 dropped by 15% compared to the first quarter – a precipitous decline. Whereas the value of land transactions by foreign residents in the first quarter totaled $145 million, the second quarter accounted for only $126 million.
The Yosi Avrahami Company (full name: Yosi Avrahami Civil Engineering) is one of the leading and most established real estate companies in Israel with a history of more than 30 years. The company has had a hand in the sale of more than 3,000 residences in addition to infrastructure and development projects. Its activities involving foreign residents began more than a decade ago in the context of a series of Tel Aviv, Netanya, and Eilat projects. “Over the years, we built strong ties to the audience of mainly European foreign buyers: London, Paris, Belgium, Rome, the US, and South Africa,” explained Sadan. “Even today, despite the slowdown in sales, we still notice demand. They might focus elsewhere, such as Haifa and Eilat, for prices under a million shekels.”
Photo Credit: PR
Do you notice any new audiences interested in Israeli real estate?
“Recently, I was approached by brokers representing buyers from Turkey. It turns out it’s not getting any easier to live there and they’re exploring immigration to Israel. As a first step, just to be safe, they want to buy an apartment here. Turkish people also love the sea and go mainly for luxury places. The same goes for people from South Africa, who won’t compromise on a sea view and is willing to part with NIS 50,000/m² and northward. For both of these audiences, we offer apartments in our “Philharmonic Project” that we’re constructing in the Kokhav HaTzafon neighborhood of North Tel Aviv, Ne’eman Towers, or our Nogah 1 project in the Yafo area. For Jews from Miami, by contrast, our projects in Eilat are much more attractive, since prices there start at only NIS 1 million.”
Does the time it takes or the bureaucracy threaten to undermine real estate deals?
Sadan: “Bureaucracy can really frustrate buyers from abroad, certainly when they’re accustomed to maximum efficiency where they’re from. Nevertheless, since most of these purchases are for purposes of immigration or Zionism, most of the time they don’t get canceled. We’ve lost few deals to bureaucracy.”
What tip would you give to foreigners interested in Israeli real estate?
Sadan: “Buy a place that suits your tastes and what you’re accustomed to abroad. Moving to Israel already involves dramatic change and the style of residence in Israel can differ strikingly from what they’re used to. That’s why I recommend finding a place that would suit their requirements abroad, so the acclimation is easier.”
Where does it pay to invest today in Israel?
Sadan: “Eilat, Eilat, Eilat. We love Eilat and think it meets most immigrants’ needs. Weather, the sea, and the sense of family add a lot.”
What do you think the Government of Israel should do to encourage immigration?
Sadan: “Stop all the recent tax legislation. On one hand, I understand the government’s wish to put local residents first but that’s a mere band-aid. The real solution has to allow both locals and foreigners to buy property – and the only way to that end is increasing the supply. The measures currently being pushed are cosmetic at best and they benefit a narrow slice of society. We can never forget this country was founded as a result of immigration, of Diaspora Jewry coming in large numbers, and I think we still have to enable those Jews abroad to come here and be part of us – but right now the government isn’t giving them that sense.”