Trends in the real estate market in Israel

Real estate in Israel costs an impressive amount – this is often forgotten when making ratings on the most expensive square meters in the world. At the same time, although Israel is involved in military operations - in connection with which the local real estate market periodically goes from a dynamic state to a slow one, this does not prevent the government of the country from systematically investing in the development of all spheres of the state, both for local residents and tourists.

For example, this year another international airport is planned to be opened in the popular seaside resort of Eilat for tourists from all over the world, new housing is being actively built across the country, hotels of international chains are opening, etc. That is, we can confidently say that military conflicts do not affect the real estate market in Israel in any way. The volume of transactions may be temporarily reduced, but this does not affect the cost now and has never really affected it. 

Innovations in Israel

What has changed in Israel over the past few years in the real estate sector? First of all, the purchase tax has increased in the country: instead of 6%, now the buyer of local housing will have to pay 8% of the property value. And when transferring funds for real estate, banks began to check their origin very carefully, with particular care this happens on large transactions. Now home buyers in Israel need to prove that the money is honestly earned and all taxes on it have been paid. If the funds were inherited, then it is also necessary to confirm this as much as possible. 

Recently, the State of Israel has also introduced a tax system for renting. The innovation distinguishes two options: when it comes to the delivery of one object or business. If you do not go into details, then if the income from renting does not exceed 5000 net shekels (after deducting all maintenance costs, depreciation of the object, etc., then you do not need to pay tax. If the rental income is within 10,000shekels, then it is possible to partially exempt from the tax, which is 31%.

There is another option -payment of 10% of income tax on gross income. It usually goes in pairs in the case of renting out investment apartments. Here the alignment is as follows: if the number of apartments exceeds two objects, then the owner must pay 120,000 shekels per year for the third apartment, 220,000 shekels for the fourth, 370,000 shekels for the fifth. Further, another 15 shekels are paid for each additional apartment. 

The last two trends certainly affected the volume of purchases. Moreover, the enhanced verification of funds has somewhat reduced the interest among non-residents of Israel. And the tax on investment apartments has affected the decrease in the number of transactions both among foreign investors and among the local population.As a result, it is now possible to observe a downward trend in housing prices, including in the secondary market.

Israel: are they trading or not?

It is supported by one interesting indicator: the number of real estate sellers who are ready to lower the asking price in order to close the deal is growing. In less popular areas, homeowners make discounts as expected more often than it happens in the popular housing market. However, experts believe that real estate prices in Israel are not declining dramatically, explaining this by the fact that this topic has been actively and for a long time discussed in various media, including Israeli, but the growth cannot continue permanently. Even taking into account the fact that sales, especially in the elite real estate market, are not as active as before - prices are standing and are not going anywhere.Therefore, attempts, in particular by Russian buyers, to popularize the topic of stagnation in order to bargain significantly for housing, do not lead to success. 

Israel is a pragmatic country

In the fall of 2018, there was a message on the Internet that the Airbnb resource had removed offers to rent housing from Israelis in the West Bank, to which the Israeli Minister of Tourism responded with an order to limit the work of the resource. However, inside Israel itself, it went completely unnoticed, besides, even if it took place, it will never become a big problem.: there is no given resource, but there are always others. In this regard, Israel is a very pragmatic country. And if we take into account that everyone who can (and there are a sufficient number of such people in Israel) is trying to rent out their real estate, and there are many of them, then no restrictions on Internet and other resources will be able to influence the owners of real estate. 

Most popular areas

Residential real estate is in the greatest demand in Israel, since mostly people buy apartments or houses there for their own living.The central part of the country is particularly popular, as buyers are most often looking for real estate in Tel Aviv or in one of the other cities on the coast of Israel. 

Tel Aviv is a big city, which has a very good location, being in the center of the country, so real estate prices there are much higher. Depending on the area, prices can be twice as high compared to, for example, Ashdod, which is located south of Tel Aviv, about 30 minutes away, but which has offers of three-bedroom apartments for 400,000 euros.

Within the framework of Tel Aviv, the northern part of the city is very much appreciated: both the old one in the Marina area and its new part, Ramat Gan. Also in Tel Aviv, the entire coastal part of the city is popular, including Neve Tzedek, Rothschild Boulevard and adjacent streets. Here, the cost of one square meter will fluctuate approximately between 14,000 and 25,000 euros per sq.m. As everywhere, much depends on the quality of the house, its features and the specific location. In less popular areas of Tel Aviv, the cost of a square meter varies from 6500 to 8000 euros per sq.m. The rental cost in Tel Aviv in good areas is 15,000 20,000 shekels per month (this is approximately 4500 euros) for;a good 3- or 4-room apartment. In more modest areas, you can find options for 6000 - 7000 shekels per month.

For a long time, Haifa and Bat Yam were relatively inexpensive. Previously, a square meter here cost 2000 - 3500 euros. But over the past year, the situation has changed: thanks to the improvement of these cities, which continue today, the cost per square meter is now growing here and, at the moment, varies from 3,000 to 6,000 euros, having every chance of further growth. The rental price here will be 4,000 - 6,000 shekels per month. 

Also popular areas that are in demand among buyers are Herzliya and Netanya, as they are located on the coast and not far from Tel Aviv. In Netanya, prices are significantly lower than in Tel Aviv: the cost per square meter here is 4000 - 6500 euros. Moreover, the maximum border will already be for the option located on the coastline. Rent an apartment in Netanya will cost 5,000 - 6,500 shekels per month.In Jerusalem, the average cost per square meter is now 5600-6700 euros. 

It is important to note that housing in Israel is being built very spacious due to the fact that the cult of a family with a large number of children is supported in the country, so the classic 3-room apartment is considered very small. Usually the area of an apartment in Israel starts from 80 sq.m. Accordingly, such immodest footage also affects the final cost of the object.

Since Tel Aviv is becoming a city where buying real estate is a difficult issue for many - especially the local population and young families - they turn their eyes to cities in good transport accessibility from it. For example, just one decade ago, the launched Pardes-Khan now looks very different. New neighborhoods, gardens and schools are being built here. The city is starting to grow along with the prices of its real estate. The option of buying real estate in Pardes Khan may be interesting for those who are now investing in long-term investments.

Thank you for your help in preparing the material:

Maria Tsarfati, real estate specialist of the company «Country Plus»

Natalia Yerofeyeva, a specialist in working with partners of the companyExperto IG