Israel: Overview

RENTAL YIELDS

Tel Aviv yields are moderate

Apartments in Tel Aviv have yields from 5.71% to 7.66%, at an average of 7%. Yields are highest for 40-square metre apartments, with a monthly rent of around US$32 per sq. m.

Apartment prices average around US$5,000 per sq. m. Medium-sized apartments of 60 sq. m have lowest yields and prices, selling at an estimate of US$4,500 per sq. m.

Read Rental Yields  »

TAXES AND COSTS

Effective tax rates are low in Israel

Effective Tax Rate on Rental Income
Monthly Income	US$1,500	US$6,000	US$12,000
Tax Rate	7.5%	7.5%	7.7%
Click here to see a worked example
Source: Disclaimer

Rental Income: Rental income is taxed in Israel. The taxable income can either be taxed as ordinary income with deductions allowed or at a flat rate of 10% without any deductions.

Capital Gains: Most properties sold in Israel are exempt from capital gains tax. If the gains are taxable, the effective rate is 20% of net gains.


Inheritance: Israel has no inheritance tax.

Residents: An Israeli resident is taxed on his worldwide income at progressive tax rates ranging from 10%-49%.

Read Taxes and Costs  »

BUYING GUIDE

Buying costs in Israel range from low to moderate

Roundtrip transaction costs, i.e., the costs of buying and selling a property, are around 6.3% to 10.8% of the total property price. The buyer shoulders most costs. Buyers must check what is included in the purchase price because property in Israel is sold with just the bare walls, unless otherwise agreed. Buyers must also check first if the land is zoned for building, not for agriculture.

LANDLORD AND TENANT

Tenancy laws

Research in this field is on-going.

ECONOMIC GROWTH

Israel's past and future

The historic region of Palestine was the focus of immigration by Jews in the late 19th century, as a result of the nationalist movement known as Zionism. This immigration intensified in the 1930s when the Nazi holocaust began.

In 1947, the UN partitioned the region into two states, with 45% of the land administered by Arabs and the remaining 55% by Jews. This partition was not accepted by the Palestinians. They lost the ensuing war, and large numbers of Palestinians were driven from their homes. They have never been allowed to return to their homeland. The Israelis ended up with the lion’s share of the cultivable land, and control over water resources.

The Arab-Israeli conflict has led to five major wars and several other skirmishes. There have been two invasions of Lebanon by Israel: the 1982 invasion, the destructive impact of which essentially created Hezbollah. Then there was the recent 2006 invasion, which targeted Hezbollah.

The recent war in Lebanon ended in August 2006 with a UN resolution declaring an immediate ceasefire. A multinational UN peacekeeping force was deployed to implement the ceasefire.

Yet peace is not assured. “The war ended with the bitter feeling that it was a mere preview of the next war,” said realtor Yitzhak Bashiri.

Israel has historically suffered relatively little in its wars, by comparison with its neighbours. The consensus among economists is that again this time, economic activity in most sectors of Israel will recover quickly. Israel’s economy is technologically advanced. Israel has capitalized on its highly skilled, educated and innovative workforce, and on enormous subsidies from the US government. The percentage of high-tech production in the overall GDP is the highest in the world.

Israel’s GDP growth has been stable for the past years. In 2005, the economy grew by 5.2% and GDP per capita (U.S. $17,800) increased by 3.3%. In the first half of 2006, the economy grew 5.9%.

Fitch Ratings retains its A-minus debt rating for Israeli sovereign debt. The government admits that the country has lost money from the decline in tourism and industrial output, but tourism is already returning to normal.