In recent years, Tel Aviv has been repeatedly recognized and had led the international rankings of the world’s top cities. Tel Aviv has become a significant focus of interest thanks to the pluralistic ethos it offers its residents, its lively cultural scene and, of course, its economic ecosystem that has produced some of the world’s most important exits. As a result, Tel Aviv has become especially attractive to foreign investors, some of whom choose the city because of the traits listed above, while others do to because they believe that an apartment in Tel Aviv is the first important step towards moving to the “city that never stops.”
If these investors need an incentive to invest in Tel Aviv, they can find one not only in the rising prices of recent years but also in the local currency, with the shekel continuously getting stronger against the dollar, the euro and the British pound.
As an example, investors who purchased an apartment in the GINDI TLV project when it was first put on the market enjoyed a 54% jump in the property’s value. Moreover, the shekel/USD exchange rate in January 2010 was 3.765 while today it is 8% lower, standing at 3.452.
All-time high demand for real estate in Israel
Considering that real estate prices in the city are expected to continue rising due to the growing gap between supply and demand, together with low interest rates, the potential return on investing in Tel Aviv real estate is far from being exhausted.
Adv. Philippe Koskas, who specializes in real estate and civil litigation and represents Jewish investors, confirms the phenomenon: “In 2019 we witnessed a new wave of real estate investments by foreign investors from Europe and the U.S. who showed a growing interest in the center of Tel Aviv as well as increasing concern about the political and social atmosphere and antisemitism in the world. Some of them even send their grown children to Israel to study and start a career in Israel, which strengthens their bond and makes them take concrete steps toward purchasing an apartment in Tel Aviv. Although the tax policy for buying real estate in Israel has changed, and today, in addition to the purchase price one must take into account a purchasing tax that starts at 8% of the apartment’s price, this is a tax rate similar to other countries in the world and therefore is not a consideration.”
On the way to buying an apartment, stop at the bank
Israel’s real estate market has also changed as a result of the global war on money laundering. Today, one cannot purchase an apartment from a contractor without opening an Israeli bank account. Moreover, Israeli banks have fallen into line with acceptable practices around the world and today they undertake a thorough process aimed at reducing the banks’ risks and exposure.
Adv. Koskas explains that, “A foreign investor from anywhere in the world except for the U.S. who wishes to open a bank account in Israel will be asked, as is customary in other countries, to sign a FATCA form or declare that they are a U.S. citizenship or own assets in the U.S. However, in some cases clients will be asked to present documents such as pay slips, bank statements and holdings, confirmation of tax payments in their country of origin and even a letter of recommendation from their bank. Therefore, we recommend opening an account in Israel before starting to look for an apartment. By doing so, it will be possible to proceed with both tasks at the same time and shorten the overall process.”
Another important subject to bear in mind when buying an apartment is that bank-to-bank wire transfers for financing the purchase can only be carried out from the buyer’s country of origin. In other words, if the buyer has French citizenship, he can only wire the funds from a French bank and not from an account in a different country where he is not a resident.
Financing conditions in Israel are especially attractive
According to Adv. Koskas, one should be aware of a significant advantage regarding opening an Israeli bank account: “Holders of Israeli bank accounts, even if they are foreign residents, enjoy access to financing when purchasing apartments, with clear criteria. Today, one can receive a mortgage valued at 50% of the property’s value with financing tracks similar to those of Israeli citizens and foreign currency tracks. In addition, it is important to know that mortgage eligibility is not limited to just one apartment. Even when buying an additional apartment or several apartments at the same time, one can always benefit from convenient financing and take advantage of the low interest rate environment and the high potential return on investing in the Tel Aviv real estate market.”
Important tips for foreign investors
In conclusion, Adv. Koskas offers several important tips for those planning to purchase an apartment in Israel:
1. As mentioned, the first important step is to open a bank account in Israel in order to speed up the process when you find a suitable property to purchase.
2. Consult with professional lawyers and accountants who have experience and are able to mediate for you in the local market. They must be proficient in Israeli law and regulations and able to advise you throughout the entire process.
3. Be aware that the price quoted to you by the real estate broker is not the apartment’s final price. The Building Input Price Index may affect the difference between the apartment’s price and the down payment, and it is difficult to predict in advance.
4. The purchasing contract, bank guarantee and land registry deed are all crucial elements in the purchasing process and in guaranteeing ownership. Therefore, make sure that your lawyer helps you with these processes, explains their significance to you, and faithfully represents your interests.