Ending soon: Low purchase tax
Savor the moment: The proposed increase in purchase tax has cleared the initial approval in the Knesset.
Exciting news for potential property buyers! The increase in purchase tax has passed its initial approval in the Knesset and is set to take effect soon. However, there has been a slight delay in its implementation, with Housing Minister Zeev Elkin stating that the finalization will likely occur next week, no earlier than Wednesday. This news has triggered a surge in apartment purchases, particularly among investors, who are eager to secure properties before the tax increase comes into effect.
Since the announcement of the impending purchase tax hike, there has been a noticeable spike in investor transactions. The current low tax rate has prompted a rush in the housing market, resulting in investors accounting for 50% of all purchases. Real estate industry sources predict that this month will witness exceptionally high numbers of apartment sales, with developers from across the country reporting a significant uptick in buyer activity. In fact, some developers are experiencing sales volumes that would typically take two weeks to achieve in just a matter of days.
To understand the impact of the purchase tax increase on your investment, let's consider a hypothetical scenario, disregarding certain expenses. Suppose the property price is 1,000,000 nis, with significant fees amounting to 30,000 nis (including agent and lawyer fees). Under the current purchase tax rate of 5%, the tax paid would be 50,000 nis. Assuming a monthly rental income of 3,000 nis, the annual yield from the rent would be 3.333%.
Now, let's examine the situation with the new purchase tax rate of 8%, resulting in a tax payment of 80,000 nis. Despite the increase in purchase tax affecting the initial investment amount, the impact on the annual yield is not significant. With the same monthly rental income of 3,000 nis, the new annual yield would be approximately 3.272%. The difference between the two scenarios is approximately 0.06%.
It's important to note that the new purchase tax primarily affects investors and foreign buyers. If you are a resident of Israel or in the process of making Aliyah, your tax brackets operate differently, offering a full exemption for properties valued up to 1.74 million nis.
This is your last opportunity to take advantage of the current lower purchase tax rates before they increase. Don't miss out on the potential savings, and consider making your property purchase now. Stay informed and consult with professionals to ensure you make the best decision for your investment goals.
Remember, time is running out, so act swiftly and secure your property investment while the low purchase tax rates are still in effect.