Buying Property in Israel

Overview

As befits a geographically small country undergoing rapid economic development, Israel boasts a very active property market. Construction and development in the market is dominated by the private sector, while the land market is dominated by the government. The property market in Israel has undergone and is continuing to undergo a significant process of maturation, moving from a market characterised by limited choice and options and low quality construction, to one which now boasts a wider range of alternatives in terms of location, size, building quality, and amenities.

The foreign investor seeking to purchase or lease a property in Israel for investment or for corporate use should familiarise himself with the operation of the market in Israel, in terms of pricing dynamics, location alternatives, the types of property available, and the legal and financial framework within which the Israeli market operates.


Important factors in choosing a home

After choosing the desired town of choice some important aspects that should be taken into account are site of the property, number of bedrooms, neighbourhood details and, of course, the neighbours, synagogues , furnished or non-furnished. If you have children then the distance to schools is an important factor.

After finding a property that you like, you may make an offer. In Israel everything is negotiable. It is common practice to negotiate with the seller over the price and in many cases payment terms and date of possession. When agreement is reached a contract for purchasing the property is drawn up by the seller’s lawyer and reviewed by the buyer's lawyer. The contract is signed and the payment is made according to the agreement. It is customary for the price of the property to be paid out over a period of months (up to 12) depending on the details. When immediate occupancy is required an advance payment will be needed.

Transfer of Title takes place after the last payment is made. It is usual to file a “warning” with the Land Registration Office after the contract is signed, stating that the property is under sale and cannot be re-sold by the seller. The buyer’s lawyer should be responsible for making sure that the change of title takes place after full payment is complete. It is not common but can be negotiated that a small percentage of the purchase price be held in trust by either your or the seller’s lawyer until the transfer of the title is complete.

Property inspections are recommended when purchasing property that is not new. Inspections can be done at your initiative and expense. A complete written report by a licensed engineer can cost £50 to £250. When purchasing a second hand home we strongly recommend inspection by a professional or at least by the buyer onsite before the contract is signed.In Israel, both the buyer and seller pay commissions, usually 2% each.

As a buyer, you can choose a property agent first or just look for properties and deal with the individual agent who is representing that particular property in Israel. Whichever path you choose, negotiations are conducted between the agents. Once an agreement is reached, the matter is handed over to lawyers. Typically, both the buyer and the seller should have their own lawyers. Consult your property agent for guidance in deciding on location, type of property, understanding what is included in the purchase price, the length of the process, etc.

Costs

The fees and taxes involved in a property transaction is Israel can be as high as 8%. These include commissions of typically 2% plus VAT (Value Added Tax) - approx. 2.36%, lawyer’s fees of typically 1% plus VAT - approx. 1.18% and purchase tax of 3.5% to 4.5 % of the purchase price.

Mortgages

Mortgages for foreign non-residents are available in Israel. The typical mortgage would be up to 60% of the appraised value, although you can also use EMI (Mortgage Insurance) as a way to increase the amount of your mortgage. On new construction projects in Israel, you can often get higher % mortgages than on resale property, sometimes as much as 80% of the value. Feel free to contact one or more of the Israeli Banks mentioned on this site for further information. If you would like a mortgage agent to help you with financing requirements please feel free to contact us for recommendations.

Terminology

In Israel, the types of property are:

    * Apartment - Building apartment
    * Cottage – A dwelling on more than one level, attached to another dwelling with its own private entrance and garden.
    * Villa – A free standing dwelling with garden attached.
    * Penthouse – The top floor or apartment of an apartment building often with a roof terrace.

Home sizes

Homes sizes in Israel are described in terms of the number of rooms, counting only the bedrooms and living rooms. In other words a 4 room apartment would most likely mean 3 bedrooms and a living room.

Also sizes of homes or apartments will be expressed in sq meters. 1 square meter = 10.7 sq ft. If you are buying raw land, sizes will be expressed in terms of dunams. 1 dunam = 1000 sq meters or 9700 sq ft.