Last Days for the Low Purchase Tax

Another delay in raising the purchase tax that was supposed to pass in the Knesset this week. According to Housing Minister Zeev Elkin, the move will only be completed next week, not earlier than Wednesday; The wave of apartment purchases by investors has intensified since the media made headlines that the purchase tax will rise. From the moment the purchase tax fell, we saw a dramatic increase in investor transactions. Meanwhile, investors are pouncing on the housing market, and investors' purchase rate jumped to 50%.

According to industry sources, this month will also see particularly high data on apartment sales. Developers from all over the country report a significant increase in the number of purchases, and some sell in a quantity that is usually sold in two weeks. A manager of one of the largest companies in the field told that "from Sunday until today, 48 contracts have been signed with investors. Usually, investors make up 20% of our turnover per year. This month, investors' purchases will be 50% of turnover."

What difference does it make to my annual yield?

Let’s imagine the following situation and ignore some expenses:
Property price – 1,000,000 nis
Significant fees – 30k (agent and lawyer fees)
Current purchase tax – 5% (50,000 nis)
Monthly rent income – 3,000 nis
Annual yield from the rent – 3.333%

Property price – 1,000,000 nis
Significant fees – 30k (agent and lawyer fees)
New purchase tax – 8% (80,000 nis)
Monthly rent income – 3,000 nis
New annual yield – 3.272%

Difference ~0.06%

As you can see, an increase in purchase tax affects your initial investment sum, but it does not affect significantly your annual yield.

Does the new purchase tax affect everyone?

The new purchase tax is imposed on investors and foreign buyers. If you are a resident of Israel (or about to make an Aliyah) then your tax brackets work differently, granting you a full exemption on the part up to 1.74m nis.