“During the pandemic, we’ve been closing deals with buyers in the UK, France and increasingly the US by phone, email and Zoom, and have many waiting until they can get here to see what they’re buying”, Says Alex Patkin, whose Tel Aviv and Haifa law offices handle real estate transactions for growing numbers of foreign purchasers.
This overseas surge in apartment purchase in Israel is largely driven by US buyers, who now have an equal share in a market that, until this year, was dominated by Europeans —especially for luxury properties in Tel Aviv and Jerusalem. The reasons for the large investment that foreign buyers choose to make are, however, universal, says Patkin.
First, an apartment in Israel is a solid and very profitable investment. A small country with a stable economy and rapidly expanding population, its property values have risen by an average 10 percent each year since 2007. Second, as well as being a wise and often diversified investment in itself, a home in Israel can be a significant earner. The country’s rental market relies heavily on private apartment owners, and is strong, stable and almost fully subscribed. Third is Israel’s popularity as a vacation destination and a place to retire — as well as ownership of a home in Israel being a (literal) bricks-and-mortar stepping-stone toward aliyah. And fourth, of course, is the same impetus that has spurred Jewish migration for millennia: safety in time of terror, unrest, political uncertainty, pandemic, financial stress and global antisemitism.
With its minimal taxes (Israel has no estate, inheritance or gift taxes, and, this past pandemic year, has cut property purchase tax), its firm market laws and clear rules of play, the country is an attractive real estate investment. Nonresident buyers must, however, enlist qualified legal assistance, stresses Patkin (usually 0.5 percent of the property cost, plus 17 percent value added tax), whether buying from developers or from private owners.
“There are written laws and unwritten practices to observe,” he says. “We provide a comprehensive service, verifying for our clients the seller/developer’s rights to the property they are marketing (mortgage, lien, seizure, third party rights), obtaining building permits, guarding against construction deviation, drafting land and apartment sales and purchase agreements, drawing up rental terms and conditions, planning land taxes and registering the buyer’s ownership. With our experience and understanding of the nuances of Israeli law, we avoid legal difficulties and make transactions easy and profitable.”
Patkin’s advice to buy now is based on Israel’s Master Real Estate System’s assessment that apartment prices, which have already risen by a dramatic cumulative rate of 7.2 percent this past year, will likely climb higher still by year’s end, fueled by a 3.4 percent jump in construction costs. In Jerusalem and northern Israel, which is experiencing a construction boom, it could be 8 percent; and in Tel Aviv, where luxury beachfront apartments sell for up to $4.8 million, 9 percent.
In Jerusalem, which remains the favorite for nonresident buyers, accounting for a third of all such purchases, the market is changing. Bigger properties — four- to six-room apartments, rather than two- to three- — are being sought, suggesting the buying of future homes rather than vacation apartments. Second favorite is the Sharon region (especially Netanya, Herzliya Pituach and Tel Aviv), where nonresidents are buying in multistory towers, rather than the intimate housing projects that characterize Jerusalem. In southwestern Israel, Ashkelon is newly popular, especially among US buyers, even though it is a scant 12 miles north of the Gaza Strip.
While luxury apartments put the top end of Israel’s real estate market beyond the reach of many nonresident buyers, its middle and lower sectors remain active, secure, profitable and accessible.
“Buying an apartment in Israel, both as an investment and as a future home, is an attractive and gainful opportunity,” says Patkin. “If you’re thinking of entering the market, you should do so now — or rising prices may rob you of the dream of a home in Israel.”