Foreign Investors in Israeli Real Estate – Problems and Solutions
As I’ve written in the past, foreign investors in Israeli real estate may opt out of investing in Israel at all. The reasons for this are many:
- When buying an apartment in Israel, the purchaser pays purchase tax. This tax has been raised for foreign purchasers. This raises the cost of purchasing the property.
- When selling an apartment in Israel there is a capital gains tax. If the apartment sold is the seller’s only apartment it is possible to ask for an exemption. Since 2013 this is no longer the case if the seller is a foreigner.
- The price of Israeli real estate has risen steadily over the past 20 years whereas in other parts of the world real estate prices have gone down, especially after the sub prime crisis of 2008.
- The Israeli tax authorities are now planning to levy another tax on the third apartment and up. This eats away at an investor’s profit from the property.
- Finally, in the past year the major currencies have fallen against the Israeli NIS. This means that it costs a foreigner even more money in his currency to purchase real estate in Israel.
What can be done?
Under the current conditions it would be wise for a foreigner to sell his Israeli apartment and convert the shekels he receives to his foreign currency. He will get more foreign currency for his shekels. When the foreign currency rises again he can reconvert the money back into Shekels and purchase an Israeli apartment again. If the prices of Israeli real estate begin to decline, as seems to be the case, he can get a better bargain on the new apartment. This is also a good chance to purchase real estate in places in Israel where the prices are still low and get in on the ground floor, as they say, on a good real estate deal. In addition to this, there are other types of real estate that may be profitable to purchase, such as commercial real estate which yields a higher dividend than residential real estate, vacation apartments and urban renewal projects.
By no means should the foreign investor give up on Israeli real estate. He should use the current status to leverage his deals and
make a nice profit.