Home prices in Israel have skyrocketed, but that hasn’t deterred all foreign investors. There are still some non-Israelis looking for property in this country. But while the proportion of properties purchased by investors has declined dramatically (30% a decade ago vs. 14% today), prices are still high and complications can arise when buying real estate.
Two of the biggest complications is not having a bank account in Israel and – the most obvious – being a foreign resident.
If you buy property as a foreign resident, you’ll be subjected to higher tax rates: 8% on properties up to 4,896,615 NIS and 10% on properties above this value. If you choose to immigrate to Israel, the tax costs will be lower.
Opening a bank account isn’t as easy as it sounds either. Foreign residents must sign a waiver of confidentiality towards the bank, give a deposit of cash, and a statement about the place of residence. A trust may be opened by a lawyer to effect payments, but going this route will also require similar steps as to when opening a personal account.
If you’re committed to buying a residential home in Israel, it’s important to understand that the process can be lengthy and there will be some costs that you might not have considered. For example, real estate agent fees range between 1% and 2% (V.A.T. exclusive) of the home’s purchase price.
Location, being the most important thing in Israel, is also a complication – especially if the potential buyer does not have the means to travel to the country frequently to look at properties. This can lead to people purchasing more costly properties in city centers to reduce the risk of buying a terrible property in a terrible location.
Just like in any other part of the world, you’ll pay more to be in the heart of a city, where everything is easily accessible. For example, you can buy a condo at One Queensridge Place at a premium – because it’s steps away from the Las Vegas Strip – or you can buy a condo with fewer amenities outside the city for a significantly lower price. The same sentiment applies to condos and apartments in the heart of Tel Aviv. You’ll pay a much higher price, but you’ll be in the middle of it all.
Additionally, foreign residents must also decide whether they want to buy a home or an apartment. Apartments aren’t necessarily cheaper, particularly if you purchase one in Tel Aviv or Jerusalem. But purchasing an apartment off plan or one that’s under construction from a contractor can save you about 15% on the purchase price. There may be unforeseen problems if you go this route, just as there would be if you were building a home, but the reward is a cheaper, new apartment.
One area where foreign residents have difficulty is with financing. Lenders typically won’t lend any more than 50% of the purchase price to non-residents. Getting approved for financing can be a challenge, which is why it’s best to buy property with cash.