Whether foreigners can buy property in Israel, how a typical transaction goes, how much the buyer pays in excess of the value of the property … The most important information for future owners is in this material.
Rights and obligations of foreign buyers
Citizens of which countries have the right to purchase real estate in Israel?
For citizens of Russia, Ukraine, Belarus, Kazakhstan and other states of the former USSR as a whole there are no restrictions on the purchase of real estate in Israel. There is an opportunity to purchase houses, apartments, as well as commercial objects in full private property, to register a transaction, both for a physical person and a legal entity. But this does not apply to all types of real estate.
Plus, foreigners will not be eligible for tax rebates when purchasing (for more details, see the section “Additional transaction costs”).
What types of real estate are allowed to buy foreigners?
The Israeli system of ownership of real estate is quite complicated. In short, the possibilities for buyers are as follows.
In Israel, there are two types of land – private and public. All objects located on private land, foreigners can buy freely, no permits from the authorities are required.
State lands, in turn, can be privatized or not. In any case, the plots assigned to the object are transferred to buyers not in full ownership, but on the rights of a long-term lease for 25, 49 or 99 years (analogous to the British system of ownership “lyshold” ).
If an apartment is located on a privatized state plot, then its purchase is not much different from the purchase of real estate on private land. At the end of the term the lease is automatically renewed. If the plot is not privatized, then the apartment owner will have to pay annually the rent to the state, plus the authorities have the right to terminate the lease agreement after its expiration.
But the most important thing is that you can buy property on state lands, including privatized ones, with some restrictions :
- Only citizens of Israel or foreigners who are eligible for repatriation under the law “On Return” can make a deal.
- To purchase, you will need to obtain permission from the Land Administration (except for apartments in an apartment building).
It turns out that foreigners without Jewish roots can only buy objects located on private lands (and there are only 10% of the total). But in practice, as lawyers say, first, no one forces the buyer to repatriate, it is enough just to state such an intention. Secondly, no one checks the pedigree in detail. In other words, the restriction can be circumvented, although this scheme is not entirely “white”.
Rights and obligations of foreign property owners
Foreign property owners have the same rights with respect to the property as citizens of the country – it can be sold, rented, extracted from it, donated and transferred by inheritance, in a word, to use at its discretion.
In this case, the obligation to pay all taxes and current expenses on real estate also apply to foreigners.
There are no advantages in obtaining a residence permit in Israel owning real estate does not.
ATTENTION: tax residents of the Russian Federation, i.e. People who spend more than 183 days a year in Russia must report to the Russian tax on opening accounts or creating legal entities in foreign banks, which may be necessary during the transaction.
Search for real estate in Israel
How to search for real estate in Israel?
To get started, explore the latest trends in the local real estate market and investment opportunities. To do this, read articles and news on Israel on Prian.ru – we publish all the most important for foreign buyers.
Then you can refer to the database of ads for this country. Israeli realtors and developers are placing on Prian.ru objects that should potentially be of interest to foreigners. If you do not find a suitable option, leave a request for the selection of real estate for your requirements.
How to find a realtor in Israel?
Mandatory party to a real estate transaction in Israel. Each side must have its own specialist. It is he who checks the legal “purity” of the object and prepares all legal documents.
Participation of a realtor in the transaction is not required. You can search for objects, communicate with sellers yourself, and already with the found option go to a lawyer. But in practice, for foreigners who do not read or speak Hebrew and are not permanently in Israel, it will not be easy. Therefore, most use the services of a realtor.
When choosing a mediator, one must take into account that realtor activity in Israel is licensed. At the same time, according to the law, the agent can only provide mediation services and has no right to advise on legal issues. The commission is paid to the realtor by the one who ordered his services – there are no fixed rates, usually 1-2% of the price of the object.
Step-by-step procedure for a real estate transaction
Stage 1. Reservation and verification of the object
After the buyer has chosen the object he liked and agreed on the price with the seller, he can reserve the property for himself so that no one else can buy it while checking is underway. For the reservation of an object, many sign a preliminary purchase agreement (the so-called zichron dvurim) and leave a deposit (1-10% of the price of the object, depending on the agreement).
Israeli lawyers have an ambiguous attitude towards this document. The main problem is that the contract is signed before the inspection of the object. This means that the terms of termination should be specified in detail if the transaction cannot take place. For example, if the buyer is not sure that the bank will give him a mortgage, it is necessary to state in the contract that this is the basis for canceling the purchase and returning the pledge. It is not so easy to compile an exhaustive list of possible grounds, and this agreement is legally binding for the court.
In addition, after the conclusion of Zichron, Dvurim begins to count down the required period for reporting to the Tax Service about the real estate transaction. As a result, if the preliminary agreement is signed too early, there may not be enough time to check.
Therefore, we recommend not to sign any documents without the participation of a lawyer. Your lawyer, knowing in detail your situation, can suggest other ways to save the prepayment and transfer it to the seller.
In any case, before signing the main contract of sale it is necessary to conduct a detailed check of the legal purity of the object. What are the rights of the owner to dispose of the object, is there any debt on the property, who owns the land, if the plot is in a long-term lease, what is its duration, and other important circumstances.
Stage 2. Conclusion of the contract of sale
The contract is usually at the seller’s lawyer’s office. Sign it only two parties – the seller and the buyer. Israeli laws do not require notarization of this document. A notary in Israel is entitled to certify only the authenticity of the signature, but not to certify the legality of the contract.
The parties may hire one single lawyer, or each of the parties may invite their own (if the transaction is not between close relatives, then it is safer that each side has its own lawyer).
The legal points are specified in the contract – rights and their transfer, payment schedule, penalties for cancellation of the transaction and breach of contract, condition of the property, date of transfer of the property.
After signing the contract, the parties also fill out a form that gives the buyer the opportunity to make a “warning record” in the TABU Real Estate Registration Bureau. This entry ensures that until this transaction is completed, no other transaction can be conducted with the object. If a mortgage is taken for the purchase, then the banks will definitely need to make a warning record in their favor.
After signing the contract, it is customary to make the first payment in the amount of 10-30% of the value of the property, depending on the agreements between the parties.
Stage 3. Payment transaction
Banks of Israel and in recent years have tightened their requirements. A foreigner can open an account in an Israeli bank and transfer money to it for subsequent payment of the transaction. The second option is to transfer money from your account in your native country to a trust account of a lawyer who, after observing the terms of the contract, will send them to the seller. In any case, the bank may require proof of the source of the funds or, for example, a certificate from the Russian tax on the absence of debts.
The terms and stages of depositing funds are prescribed in the contract of sale. Payment occurs in Israeli shekels, so you need to take into account the cost of currency conversion.
Also, the buyer must pay all taxes on the purchase, after which the new owner can be registered.
Stage 4. Registration of ownership
After full payment of the property, the buyer receives the keys and can use the object, but the transaction is not yet completed.
A lawyer must register a new owner in all state registries of real estate. The process is not fast – it can take up to nine months. But the buyer must ensure that the lawyer has completed the case.
To ensure the correct registration of the object, you can split the lawyer’s fee into several parts and transfer the principal payment to him after receiving an extract from the registry.
Remote purchase option
Remote purchase of real estate in Israel is possible. However, some documents must be executed directly in Israel. So, a notarized power of attorney must be issued to a lawyer, which gives him the right to perform all the necessary legal actions and sign documents.
Real Estate Purchase Tax: 8-10%
When buying real estate in Israel, the state tax is paid (mass rehisha). Its size depends on the price of the object, the status of the buyer (citizen, repatriate or foreigner), the type of real estate (residential, commercial, land) and the number of objects owned.
Tax rates for the purchase of the first residential real estate in Israel
|Property price, shekels||Tax rate|
|Up to 1,623,320||0%|
|1,623,320 – 1 925 460||3.5%|
|1 925 460 – 4 967 445||five%|
|4 967 445 – 16 558 150||eight%|
Tax rates for the purchase of residential real estate in Israel, which is not the only property
|Property price, shekels||Tax rate|
|Up to 4,967,445||eight%|
Foreigners are not entitled to a reduced tax rate, even if they purchase the first property in Israel.
Please note – the base for calculating the tax on the purchase of real estate in Israel is recalculated every year. The article contains data for 2017. Actual information can be clarified on the website of the Israeli Tax Agency (Hebrew) or use the tax calculator (English).
Mare rehisha tax must be paid in full within 60 days after purchase. There are penalties for late payment. As a rule, the lawyer who conducts the transaction follows the payment of the state fee.
Lawyer’s fee: 1-2% + VAT
A lawyer is the most important participant in a real estate transaction in Israel. He orders and checks the main documents for the object (an extract from the registration bureau, a certificate from the land office, an extract from the register of pledges, etc.), draws up a sales contract and explains to the buyer his rights and obligations, keeps the client’s funds in a trust account, monitors object registration. In a word, accompanies the client at all stages from the moment the object is selected.
The cost of services depends on the type of transaction. Simple sales of apartments, as a rule, are estimated at 1-1.5%, more complex transactions with commercial objects – 2% + VAT. Usually, the lawyer’s fee is paid upon signing the sales contract.
In the secondary market, each party to the transaction hires its own lawyer. At the primary stage – regardless of the fee of his lawyer, the buyer also pays the legal costs of the developer for the registration of ownership rights. This is done by the developer’s lawyer and he, in turn, also receives 1-2% of the transaction amount.
Realtor’s Fee: 1-2% + VAT
Services of a realtor in Israel are paid by those who order them. Payment can be received only by a licensed realtor and only on the basis of a written agreement signed by the client. The contract stipulates the amount of remuneration in advance – as a rule, 1-2% + VAT – as well as the terms of the transaction.
Responsibilities of a realtor – selection of options that meet the requirements of the client, the organization of real estate views, negotiations and bargaining on behalf of the buyer with the seller.
State fees for registration of the object: about $ 300
For making entries in the Register of the new owner, the state authorities charge duties. These expenses are not included in the lawyer’s fee, each party pays extra. The amount of fees is small – in most cases less than $ 300.
Mortgage expenses: up to 0.5%
In the case of obtaining a mortgage, the bank will take a fee for opening a loan, will attract its appraiser to analyze the object, there will be small administrative costs. Also, in order to issue a loan, it will be necessary to insure the property and the life of the borrower. As a result, the transaction value may increase by 0.1-0.5%.
Total, the buyer will pay 10-15% in excess of the value of the property in Israel.
Features of the Israeli real estate market
Prices in Israel
Israel is an expensive country for buying property and living. Over the past 10 years, prices for local apartments have jumped by 100-300% depending on the area. Despite attempts by the authorities to contain growth, prices are still relatively high. “Square” housing in the national average is from $ 4000-5000, in large cities – from $ 8000.
Mortgage in Israel for foreigners
The mortgage market in Israel is well developed and open to foreigners. Most transactions take place with a loan. True, the conditions for issuing loans for citizens of another country are more stringent than for local ones. In particular, the required amount of equity capital is higher, more documents are required for opening a loan, the rates will be higher.
- Foreigners are free to purchase real estate located on private land in Israel. There are restrictions on the purchase of objects registered in state property registries.
- Buying a property of any value does not entitle you to a residence permit in Israel.
- Additional transaction costs reach 10-15%. The largest item of expenditure is the tax on the purchase of real estate, which for foreigners is 8-10% of the price of the object.
- The lawyer must be involved in the sale procedure – he is responsible for the legal “purity” of the transaction.