http://www.buypropertyinisrael.com/ KohanaPHP Sat, 19 Nov 2011 15:40:52 -0600 http://www.buypropertyinisrael.com/article/changes-in-israel-real-estate-tax-law-effective-2011 By Nicole Levin What to do about the Israeli real estate bubble?  That has been the question asked by many Israeli real estate professionals and government officials.  The prices of apartments have soared in the past few years making buying an apartment for many families a pipe dream. In steps the Israeli Ministry of Finance to save the day! I am being facetious of course.   In mid February of this year the Ministry of Finance enacted a series of changes to the existing laws governing  purchase tax and capital gains tax.  The purpose of some of these changes was to stop the rising real estate prices.  Below please find a few of the changes: 1. Change in the purchase tax.  Purchase tax for single apartments was lowered while purchase tax for an additional apartment was raised.  This helps young couples and families purchasing a home (where this is going to be the only apartment they own) as it greatly reduces the purchase tax they will have to pay.  Indeed, if the apartment is less than 1,350,000 NIS there won’t be any purchase tax to pay at all.  However, anyone who already owns an apartment and would like to invest in real estate by purchasing an additional apartment will pay a much higher purchase tax.  Indeed, if the additional apartment that they buy is  1,000,000 NIS they will pay 5% of this - a whopping 50,000 NIS!  Anyone who enjoyed in the past a partial exemption from purchase tax (such as new immigrants and disabled people) should crunch their numbers first.  After these changes the difference between the purchase tax paid by a new oleh for example and that paid by the purchaser without this exemption is negligible and in some cases the new oleh will pay more if he asks for this partial exemption! 2. Change in Capital Gains Tax.   In all real estate transactions the sellers are liable to pay capital gains tax.  In the case of residential apartments the existing law allows for several types of exemptions from this tax. Examples of this are:  If a person owns more than one apartment then he can sell one of his apartments with an exemption from capital gains tax every four years.   If the seller has only one apartment then he can get an exemption from capital gains tax once every year and a half.  This means someone (who only has one apartment) can buy an apartment, sell it and get an exemption and then buy another apartment instead of the one he just sold and sell that apartment in a year and a half and get an exemption from capital gains tax on that apartment too.  There are also exemptions for the sale of apartments gotten through inheritance, giving apartments as gifts between close family members, the sale of two small apartments in order to buy one large one etc.  Under the new law (which will be in effect for a period of two years only, unless extended) sellers will be able to get an additional two exemptions in addition to any exemptions they could have gotten under the existing law.  This means that people with multiple apartments can sell some or all of them and get exemptions from capital gains tax for these sales without having to wait the four years between sales with exemptions. 3. Limit to the exemptions from capital gains tax under the new law: The additional exemptions in the new law are limited to a price of 2,200,000 NIS.  This means that if the price of the apartment sold is less than 2,200,000 NIS then the seller will get a full exemption from the capital gains tax.  If the price of the apartment sold is more than 2,200,000 NIS then the seller will get an exemption from the capital gains tax for the amount of the price up till 2,200,000 NIS and he will be taxed for the amount of the price above 2,200,000 NIS. 4. What happens to the exemptions under the previous law:  Sellers can still use the exemptions from capital gains tax that were in effect under the previous or what I called above the existing law. 5. Tax planning:  The changes in the law make it necessary for sellers to do some tax planning with their real estate attorney.  For example, if a seller has an apartment that is worth 3,000,000 NIS and an apartment that is worth 2,000,000 NIS he can get an exemption now for both apartments without waiting four years between sales.  He should use the previous law for the exemption from the capital gains tax for the apartment selling for 3,000,000 NIS  because the previous law did not have a price limit and only apartments that sell for more than 2,200,000 NIS can get a full exemption from the capital gains tax under the previous law.  For the apartment selling for 2,000,000 NIS the seller should ask for the exemption under the new law.  This is just a simple example of how a little tax planning can save a lot of money. 6. New changes to the new law:  The new law is in effect until the end of December 2012.  The purpose of this law is to encourage people with several apartments to sell them now, thereby flooding the market with more second hand apartments which may bring down the prices.  In order to put pressure on all apartment owners to sell their apartments now, another change in the law was enacted in August of this year.  According to this change, starting from 2013 the law pertaining to the exemption from capital gains tax will revert to what it was before, but the exemption from capital gains tax will only be allowed once every 8 years for people who own more than one apartment.  However, people who only own one apartment may sell once every year and a half and get the exemption from capital gains tax just as they did under the previous law. The new law has brought with it many legal and technical problems as well.  We will have to wait and see if the changes in the law will bring about the desired effect of bringing down the prices of apartments in Israel or at least of stopping the rise in prices. Nicole Levin is an American born, Israeli trained real estate attorney with over 28 years experience in Israeli Real Estate transactions.  Nicole Levin has offices in Jerusalem, Modiin and Beit Shemesh.  To get Nicole Levin’s free ebook “Essential Things You Need To Know About Buying Real Estate In Israel “ sign up for her newsletter at  www.levinlawoffices.co.il. Mon, 14 Nov 2011 11:06:49 -0600 http://www.buypropertyinisrael.com/article/forex Forex Israel is a specialist foreign exchange provider offering innovative solutions and service to a wide array of both corporate and individual private clients. We offer clients competitive exchange rates and sophisticated foreign currency tools normally reserved for large corporations and institutional investors. Our expert consultants offer planning and individual advice suited to the varied needs of our clients. Whether you are a resident of Israel holding foreign currency or an international investor buying in Israel, you will likely have to perform one or more currency transactions to complete your property purchase. To find out how we can save you thousands of shekels on your currency exchange please fill in the form below and one of our consultants will contact you to give you further information. Mon, 14 Nov 2011 10:33:49 -0600 http://www.buypropertyinisrael.com/article/mortgage-israel Mortgage Israel was founded in 2003 to assist people in obtaining financing for Israeli real estate, both in the residential and commercial sectors. We were the first Mortgage company of its kind in Israel, catering exclusively to the international English speaking market.   Through our extensive network and relationships with the Israeli banks we are able to secure for clients preferred rates and terms.  Our consultants have up to date information on the latest bank offers and help clients navigate through the many options and products available to them.    Our clients include local and international buyers and we work closely with local lawyers, various real estate companies, builders and other industry professionals. Our head office is based in the center of Jerusalem, with offices in Ramat Beit Shemesh, Ramat Gan, Ranana and Toronto, Canada. To speak with one of our consultants please fill in the form below. Mon, 27 Jun 2011 12:17:05 -0500 http://www.buypropertyinisrael.com/article/veranda-real-estate Veranda deals with property management and real estate brokerage. They provide top caliber service while maintaining open and discrete communication with the clients.  With more than 15 years of experience in real estate, Veranda's goal is to ensure that property owners obtain maximum return for their investments with minimum bother. Who benefits from property management services?  ALL property owners who wish to obtain maximum return from their real estate investments as well as peace of mind.  If you have a question about receiving Property Management Services or would like to receive a Quote, please fill out the Form below so that Anat or another representative from Veranda can be in touch with you.   Sun, 08 Aug 2010 11:23:18 -0500 http://www.buypropertyinisrael.com/article/be-sure-to-check-the-va-ad-habayit The Va'ad Habayit system was founded in 1968 in Israel.  A va'ad habayit is basically a "committee of an apartment buildings owners" who take responsbility for managing funds that are contributed by each apartment owner for the upkeep of common areas and related services, such as elevator and garden maintenance, the costs of communal heating and hot water systems, cleaning, gardening, and National Insurance (Bituach Leumi) for the cleaner/s. The amount varies enormously in accord with the type of services provided, and is usually collected on a monthly basis.  A va'ad head is elected or appointed to ensure that the cleaning is done, supplies paid for and that everything, including repairs to the roof, is shared equally among all the residents in the building. Also initiated in 1968,  the Assocation for Better Housing (Ha'aguda letarbut hadiyur), a non-profit organization was formed to help protect tenants' rights in apartment blocks.  To become a member of the association, each apartment owner needs to pay NIS 25 per year to receive legal services and council.  In a 2007 interview with jpost.com, Sami Israel, the legal advisor to the Association for Better Housing, estimated that 80 percent of the apartment buildings in Tel Aviv subscribed to the va'ad habayit system.  The person who volunteers to head the va'ad, says Israel, needs to take care of all the maintenance problems associated with the building. "Usually no one wants this position," he notes, "but it is an important one, especially to ensure that property values increase.  We check houses where there is no va'ad.  They are dirty and no one wants to live there - the value of the house goes down.  Where there is a va'ad in place you can see a garden and other facilities that are well maintained." Tue, 13 Jul 2010 13:49:56 -0500 http://www.buypropertyinisrael.com/article/the-first-step-in-the-mortgage-process Get Pre-Approved The first step in taking a home loan for a property in Israel, is obtaining a letter of pre approval.  Pre-approval letters are prepared even before you've picked out your home, based on what you can afford.  With a Pre-approval letter in hand, buyers know exactly how much they can borrow -- and therefore how much house they can afford.  This puts the buyer in a stronger position to make an offer, negotiate and close on a property.  Over the years we have seen many people manage to secure a property, while the other potential buyers are rushing to see if they can get a loan from a bank.  Getting pre-approved gives you the time to find the best mortgage deal.  Pre-approvals are valid for 3 months and can be easily extended if you do not find a property immediately.  If you are starting to look at buying a home, the first step should always be to get pre-approved for a loan. Open an Israeli Bank Account Its a good idea to open an Israeli bank account as early as possible and make sure to deposit money in the account.   Most Israeli banks will want to see 3 months of your bank statements.  Keep your account in good standing, with a positive balance and make regular deposits.   Even if you have an income abroad, and cash checks at a money changer, depositing the funds into your shekel account for a few months prior to making an application, can go a long way to helping you with a mortgage approval.  Make sure you do not bounce any checks or have any returned debit payments in your account.  One bounced check can cause a lot of problems. This information was prepared by Avner Buntman with Mortgage Israel.  If you have a mortgage question for Avner or would like to get pre-approved for a Mortgage in Israel, write to us at mortgages@buypropertyinisrael.com Sun, 11 Jul 2010 18:15:16 -0500 http://www.buypropertyinisrael.com/article/types-of-mortgages-available-in-israel There are a wide range of mortgage options offered by the various lending institutions in Israel and it is important to select the loan that best fits your financial profile. Some of the most popular loan options available in Israel include: 1. Shekel Mortgages The shekel mortgage is the most common type of loan offered by Israeli banks.  It is generally a variable rate mortgage, which means that your repayments are not fixed for the period of the loan and will increase or decrease depending on current market rates and economic conditions.  The majority of shekel loans are either linked to the Bank of Israel Prime rate or to Madad (cost of living index). The maximum mortgage period is up to 30 years.  Recently a few banks have offered a completely fixed rate shekel loan, at higher interest rates than the variable option. 2. Foreign Currency Mortgages This is a mortgage in a foreign currency such as Dollars, Sterling, Euro, Swiss Franc or Japanese Yen.  The interest rate is based on the LIBOR (London Inter Bank Offered Rate) of that currency plus a bank fixed premium.  Many homeowners choose a foreign currency mortgage that parallels the currency of their income in order to 'hedge' themselves against currency fluctuations.  For example:  A US Dollar income earner might choose a US Dollar mortgage in order to avoid the impact of a depreciating US Dollar. Other homeowners choose foreign currency mortgages because of more competitive interest rates.  Taking out a loan in a currency other than the currency of one’s income involves substantial currency risk. If the currency appreciates one can find themselves paying far more for their loan than anticipated. 3. Fixed Loans Until recently, almost all loans in Israel were linked to variable rates.  More recently, some lending institutions have begun offering fixed rate loans for a maximum period of 20 years.  Although these mortgages guarantee the payment for the duration of the loan, they can sometimes have significant penalties in the event that the mortgage holder prepays the mortgage. Currently there are a number of banks that offer loans to foreigners. Each of these banks has its own individual products and terms of loan. The rates and service can vary greatly between different lenders.  Over the past few years there has been a large increase in the number of foreign buyers, both as second homes and for investment purposes.  A loan can be arranged for a foreign resident without having to ever visit Israel. This information has been provided by Avner Buntman with Mortgage Israel.  If you have additional questions for Avner or would like to get pre-qualified for a Mortgage in Israel, contact us at mortgages@buypropertyinisrael.com   Tue, 22 Jun 2010 13:35:30 -0500 http://www.buypropertyinisrael.com/article/use-your-ira-to-buy-investment-real-estate-in-israel If you are a U.S. citizen and have a self-directed Individual Retirement Account, you may not be aware of the fact that you can actually purchase Investment Real Estate in the U.S. or internationally.  This is information your Stockbroker may not want you to know because he or she would love to see your funds invested in stocks, bonds or mutual funds.   There are obviously rules you must follow, but it is totally allowable and legitimate to use funds in your IRA to buy Investment Real Estate. If you would be interested in speaking with someone who can tell you more about this possible investment path, contact Lyle Plocher at lyle@buypropertyinisrael.com for a Referral. Once you have found out more, you are encouraged to consult your Attorney or Accountant or the IRS to confirm things.  Wed, 02 Jun 2010 10:36:06 -0500 http://www.buypropertyinisrael.com/article/the-request-for-real-estate-brokerage-services The Israel Real Estate Law established in 1996, requires that a Form with some basic information regarding the details of a Real Estate Transaction must be documented in writing and signed by the Client who is being represented by a Real Estate Agent in Israel, if the Agent wants to get paid for his services.  The "Request For Real Estate Brokerage Services" is the form typically used by Real Estate Agents in Israel to document that they assisted a Buyer or Seller with a Real Estate transaction.  The same form is used for both buyers and sellers, landlords and tenants.  The form requires certain basic information about the Client, the specific property or properties that would fall under the agreement, the rate of commission to be paid and obviously identifies the Company and Agent representing the party or parties. If you are looking to rent or buy a property in Israel or sell or lease a property that you own, and you intend to use a Real Estate Agent, then expect to sign the "Request for Real Estate Services" form.  Real Estate Agents will typically require that you sign this form before they show you a property or properties. A few things to be aware of in general when dealing with the "Request for Real Estate Services" form, include (1) Do not sign an Agreement with 2 different Agents regarding the same property or you will have obligated yourself to pay 2 commissions.  (2) Although a 2% Commission Rate is probably the predominant rate, commissions are negotiable.  (3) The Real Estate Commission becomes due and payable upon the signing of a "binding agreement" between you and the other party.  (4) On rentals, it is pretty typical to pay a commission at a rate that equals one month's rent on a twelve month rental agreement. Wed, 28 Apr 2010 22:51:36 -0500 http://www.buypropertyinisrael.com/article/eight-questions-to-ask-before-you-buy-a-home-in-israel That’s the title of an article at haaretz.com, written earlier this year by Guy Liberman.  Although it’s difficult to tell when you read the article where one questions ends and the next begins, the article does have some very good information for those people who are considering buying an apartment in a “new” building in Israel. check out the article Wed, 28 Apr 2010 22:43:28 -0500 http://www.buypropertyinisrael.com/article/a-great-resource-for-those-interested-in-buying-property-in-israel Jerusalem based Real Estate Attorney, Dr. Haim Katz has provided some great resources for people who are interested in buying property in Israel.  He has recently authored a book entitled “Buying Your Home in Israel”.  Visit his website and see for yourself.  The book can purchased on the website or an e-version can be downloaded for free. Dr. Katz’s website   Wed, 28 Apr 2010 22:38:14 -0500 http://www.buypropertyinisrael.com/article/extra-costs-in-purchasing-a-home-in-israel Unlike in the United States, where the seller usually pays the real estate agent around five percent of the selling price, in Israel it is customary for the buyer to pay the Real Estate Agent a two percent commission.  Add to that the Value Added Tax (VAT) which is 15.5% on top of the commission.  In addition to VAT, there is also a Purchase Tax on property. To read about these considerations, plus more when buying a property in Israel, check out a brief article at the Arutz Sheva website, written by Jerusalem Real Estate Agent, Baruch Finkelstein Tue, 27 Apr 2010 22:16:16 -0500 http://www.buypropertyinisrael.com/article/types-of-land-in-israel Mike Decker, the author, has a B.A. in law and is a partner at the law offices of Yehuda Raveh & Co. For legal advice in purchasing real estate in Israel contact Mike at: mdecker@yrlegal.co.il The three different categories of land in Israel are: those which may not be purchased by foreign citizens; those which may be purchased by foreign citizens, yet are subject to various conditions; and those which may be purchased by foreign citizens not subject to any conditions. The overwhelming majority of land is Israel is owned by the State and only a small minority is under private ownership. A negligible portion of land in Israel has not yet been categorized into either of these two areas. Approximately 7% of the allocated land in Israel is privately owned. The rest, i.e. 93%, is owned by the State and is known as “Israeli Land”. Israel’s Basic Law on real estate states that Israel’s Land is jointly owned by the State (69%), the Development Authority (12%), and the Jewish National Fund (12%). While the law expressly forbids transferring of such land either by sale or other means, it does imply that a long term lease would be permitted. State-owned land includes all land that was subject to the British Mandate prior to the foundation of the State of Israel and was requisitioned by the government subsequent to its establishment. Development Authority-owned land includes land that was confiscated in accordance with the Absentee Land Law and the Land Purchase Law. JNF-owned land consists of land purchased before and after Israel’s inception. The JNF’s by-laws grant it a fiduciary role, stipulating that land it owns shall be held for the benefit of and in trust for the Jewish people. This principal has so far been respected and was solidified in a treaty entered into between the JNF and the State. A bill has recently been submitted to the Knesset (Israel’s parliament) with the interest of legislatively solidifying this principal and is likely to be passed in the near future. State owned land (”Israeli Land”) is administered by the Israel Land Administration (ILA). Being a government orchestrated entity, the ILA exercises very limited powers, namely: the administration of State-owned land. The ILA is required to remain faithful to the purpose for which it was established and may not deviate from its authority. Furthermore, being a government entity, the ILA is subject to legislatively mandated modes of behavior, such as equality in hiring standards and the proscription of discriminatory practices. While there is no legislative mandate prescribing the objectives the ILA must advance, these have been established through judicial precedent. A seminal ruling dictating these objectives can be found in the Israel Supreme Court case of Adal Ka’adan v. the Israel Land Administration: “…The objectives that comprise the core authority of the Israel Land Administration are the continuation of State control of Israeli Land and the perpetuation of the administration and development of land in Israel under the concentration of a singular government entity. This is to prevent the transfer of ownership to non-favorable entities, to advance security issues and to authorize the operation of different national projects – such as: the absorption of new immigrants, the proper distribution of the population and agricultural settlement…” Now that I have clarified the different types of land prescribed under Israeli Law, I would like to discuss the opportunities existing for their acquisition. In principle, land that is owned by the Jewish National Fund can be leased to Jews only. The implication is that foreigners, as well as Israeli citizens and/or residents who are not Jewish, are not entitled to lease this land. Nevertheless, the land that is owned by the Development Authority and by the State can be leased to any citizen of Israel, whether he is Jewish or not. Foreigner’s who are Jews and are entitled to immigrate to Israel under the Law of Return may also lease this land. It is our experience, though, that in spite of the aforementioned limitations, foreigners who are not Jews can also lease land from the Israeli Land Administration, although this would be subject to approval by a specially convened committee. Such approval, should it be granted, is subject to submission of a cogent and persuasive letter demonstrating the potential contribution the applicant can make to Israel. Recommendations from several Israeli sources attesting to this can also smooth the way to receipt of approval. Another option is to register a company and/or a not for profit organization in Israel and ensure that this entity has a board primarily comprising Israeli citizens. The 7% of privately owned land is much less restrictive. The owner of such land may transfer his ownership to any other person, whether he is Jewish, non-Jewish, Israeli or non-Israeli. Most of the privately owned land in the country is located in urban areas, chiefly in the large Israeli cities of Tel Aviv, Jerusalem and Haifa. This is ascribed to the State not having requisitioned such land prior to its inception. This land, due to its geographical location and owning to the relative dearth of privately owned land, is in great demand today. Once again, there is no restriction on purchasing this land, irrespective of the potential buyer’s religion or nationality. Tue, 27 Apr 2010 22:11:09 -0500 http://www.buypropertyinisrael.com/article/the-basics-of-buying-property-in-israel In Israel, both the Buyer and the Seller pay commissions to their respective Agents.  Real Estate Agents in Israel predominately charge 2 % of the price of the property.   As a Buyer, you can choose a Real Estate Agent first or just look for properties and deal with the individual Agent who is representing that particular property.  Whichever course you choose, negotiations are conducted between the Agents. Consult your Real Estate Agent for guidance in deciding on location, type of property, understanding what is included in the Purchase Price, the length of the process, etc.  Be sure and determine what is included in the purchase price because property in Israel is sold with just the bare walls unless otherwise agreed.  Once an agreement is reached, the matter is turned over to Lawyers. Typically, both the Buyer and the Seller have their own Lawyers. The Lawyers do all the necessary research to determine the legal status of the property, insure that improvements that were made, were done with the proper permits, etc.  Obviously, the price and all financial terms are incorporated into the Agreement by the Lawyers.  Upon signing the Contract to purchase your property, you must be prepared to make a first payment and your Lawyer and Real Estate Agent will present their bills-their fees are due at this point.  In addition, the purchase tax is also due, however you do have a 50 day grace period to pay the tax.  Coordinate this payment with your Lawyer. Before an Agent will show you a property, they will ask you to sign a “Request for Real Estate Services”.  This form is required by Israeli Real Estate Law and becomes the Agreement which legally entitles the Agent to a commission.  Make sure that the exact address is indicated on the Agreement, especially if you are looking at property with more than one Agent, so you don’t get into a situation where you obligate yourself to pay 2 commissions for the same property. For additional information about the buying process, write me at lyle@buypropertyinisrael.com.  If I can’t answer your questions for you, I will put you in touch with a Real Estate Agent or Attorney in Israel who can.