Change in tax codes – will it really help or hurt homebuyers?

The new finance minister, Yair Lapid has announced a change in the tax rate on the purchase of apartments to alleviate the difficulty “for young couples”.  The new tax rates announced that will go into effect on May 5th are that a home costing up 1.47 million NIS will not be subject to purchase tax. From May 5  a purchase of a home of any price for a first time buyer only will be a flat 3.5% for any priced home costing more than 1.24 million.
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The plan is designed to help only first time home buyers and to finance it by creating a betterment tax for those buying a larger or more expensive home even if it is their primary residence.

The current maximum purchase tax rate is 7%, on purchases of homes for investment costing NIS 3.26 million or more. On May 6, this rate will be lowered to 5%, and the threshold will be lowered to NIS 1.05 million. In 2011-2012 a tax freedom for the sale of an investment property (any home other than your principal dwelling) was temporarily offered to entice those holding investment properties to sell in order to create inventory which would help lower prices.

This new code primarily attempts to help the new home buyer. The government’s plan to finance this new tax plan will place a new burden and revenues on those who are moving up the housing ladder on a larger or luxury home, in essence the 2nd home purchase. Sale of investment properties or second homes will no longer be exempted from sales tax.

It is this writer’s opinion that the government has succeeded in its stated goal in late 2010 to forcibly burst any development of a housing bubble by increasing the minimum downpayment to 40% from a former more open market where the bank could opt for as low as 10% down to qualified customers. The effect of all of these measures has been to overall depress the housing market and impede first time home buyers who would be far more assisted with a low downpayment than a release from a purchase tax which might have formerly amounted to only a few thousand US$.

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Israel Home prices down in Q1

A U.S. magazine ranking housing markets globally has removed ISrael from the top ten in housing growth markets. In real terms the statistics reflect a minimum of a 5% drop in major cities where increases had been higher in 2010-2011. Israel has now dropeed to number 27 since the begining of 2012.

It is this author/realtor’s note that around the Jerusalem and Tel aviv markets where I have the most experience, prices have dropped in certain neighborhoods more than others.  Due to the recent strength of the US dollar, buyers with capital and the desire to own property in Israel are looking in traditionally Anglo-saxon locations, such as Raanana and the central neighborhoods of Jerusalem, such as Baka, German Colony and other residential areas close to city center. there prices have remained the same as Q2 2011.

Peripheral areas or the cities that are traditionally lower priced have finally made the adjustment that in order to sell and beat competition prices have dropped on popular advertising sites such as Win-Win and Yad2 8-10%.

 

Tel Aviv – Singapore?

We recently attended one of the national housing fairs and were bombarded with helium balloon carrying uniformed young people asking us as we entered, “Are you interested in a tower in Givatayim?” We thought, why not, tower living seems to be the hottest trend in Tel Aviv real estate and the on-paper price before construction is often very attractive. By finish date based on present values it could seem that the invest on paper could pay off with an apartment in a luxury tower that is worth nearly 40% more.

It seemed like a lot of hype was involved in pushing this project which will be the tallest tower in Tel Aviv. We found it interesting enough to stop into their offices to check out time frames and prices and to our surprise with all that hype at the fair that there were almost no units left.  Because of the height of the tower and the glass corners, three sides will have a sea view.

I began to look at other tower prospects to see that there is enough construction going to say that it is a definite trend.  Plots of land are being purchased in Tel Aviv, existing buildings then torn down and a new mega-tower built on the site. On Rothschild Blvd. alone there are two projects heading up to the sky that were sold out almost immediately on offering on paper.

Real Estate markets around the world have placed Singapore and Tel Aviv consistently in the top ten markets.  Will the present Tel Aviv skyline soon look like Singapore?  The two seaside commercial cities are moving that way. I just hope enough of the beauty of the old Tel Aviv remains, while the development will redeem parts of the city that were shabby anyway and offer more housing to a fast growing metropolis.

WinWin tells all

Discover what the apartment you are looking at sold for last! Now information that was only available to their respective parties or government offices is now available to the public through the Hebrew website www.winwin.co.il.

You can search for this information by street and number to find what the latest most recent sale was for your area or even specific property. Also listed is the date of sale and net square meterage according the the deed (nesach). 

In the United States this information has recently also become available to the average buyer and moved out of the realm of National Association of Realtors only or those who would seek it out through the deed registry.

As you look, it is important to keep in mind that as stated in previous articles, home prices have rapidly increased countrywide in Israel including the recent statistic of 29% since 2008 for a four-room apartment.

Oil, Israel and Real Estate

The largest reserve of natural gas, over 16 trillion cubic feet, has been discovered off the coast of Israel, and is estimated to be worth more than $95 billion, U.S. company Noble Energy Inc. announced on Wednesday, according to Ha’aretz.   

The Israeli economy is considered to be one of the best in the West, which should favor Israel as a continuing strong contender in the investment real estate market.

Luxury market returns strong in Capitol

The Jerusalem luxury market, which had slowed significantly in comparison to the overall robust market in the city is showing signs of a big return.  According to News 1, the luxury sales are rebounding.  Investors in the city are looking at the luxury market as a potential for the best overall return on investment in the near future.

New luxury projects are being sold on paper, Africa-Israel is now selling its newest planned development for 148 luxury units on Neviim St. (Prophets St.).  The company is now seeing a significant gain in its earnings in its ISraeli developments ending its 3rd quarter with a profit of 12 million as opposed to a profit of 4 million in the same quarter last year.

The company’s luxury buidling on Harav Kook St. had shown slow earnings in its early offering but is now more than half sold out.

What Israeli’s want in an apartment; new survey shows

A survey of 4000 potential apartment purchasers at an Israeli housing fair reflects the limits of what Israeli’s can and or are wiling to spend and what are non-negotiables in their spending.

Of those surveyed the majority accept the reality that they will probably not own a single family home in their lifetime.  Accepting apartment living most choose to purchase what will suit the needs of the number of children they will have.  Few are willing to spend considerably more to upgrade. Tower living is high on the choice list, but 89% want a balcony.

With new mortgage and downpayment restrictions of 40% down, only 32% are willing or able to add more than 400,000 NIS to purchase a larger or more luxurious apartment.

On the dream list, 23% of respondents would aspire to buy a luxury unit on a high floor; 22% dream of a penthouse; 20% want to buy a private house; 14% would be satisfied in a garden; 11% want an apartment with large balcony; and 7% dream of a duplex.

As far as location, Israeli’s are homebodies, 67% preferring to buy in the community in which they were raised or the closest community nearby if their hometown is out of their price range, only 33% willing to purchase at a distance from their family.

Where’s the luxury market in Israel today?

There is a concern on the street that the fallout of the property market in the United States and the losses of wealth for potential buyers has harmed Israel’s luxury market.

Evidence indicating that those who have the means to invest in luxury units in Israel continue to do so.  As a sales representative for the Jerusalem of Gold project on Akiva St. in the center of Jerusalem, Jerusalem’s most exclusive and luxurious project is already 45% sold before completion, and the project is about to begin digging its phase two tower.  The two terraced penthouses in Jerusalem of Gold are still available, the penthouse priced at 20 million.

According to Ynet news, Tel Aviv’s luxury G Tel Aviv Tower recently sold two flats for 19 million; “What we see here is a price increase of $500,000 – 25%, compared to deals signed about half a year ago,” says project’s marketing manager, Sharon Muman. “This deal basically completes the sales of the entire project, which has one last penthouse left.”

Contractors are reporting a shift in sales to the positive with buyers from european nations purchasing in the luxury tower market. The slump of ten months after the October 2008 crash has already begun to turn with Israel being one on the hottest world markets. The project manager of Jerusalem’s “Supreme” project recently sold 17 units, buyers paying 75-100% of purchase price up front.

One professional real estate investor commented that her holdings in Israel were all strong, while her US investments have all plummeted.