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Last Updated: Jul 15, 2016




The average price of owner-occupied dwellings in Israel rose by 4.01% during the year to Q1 2016, to ILS1,423,000 (US$369,107), from annual price rises of 6% in Q4 2015, 5.2% to Q3, and 7.3% to Q2, and 7.6% to Q1, according to the Central Bureau of Statistics (CBS). When adjusted for inflation, house prices rose by 4.52% y-o-y in Q1 2016. On a quarterly basis, nationwide house prices rose by 0.4% (1.37% in real terms) during the latest quarter.

Gush Dan saw the highest house price increase during the year to Q1 2016, with prices rising by 11.7%. It was followed by the Northern district (9.5%), Qrayot Haifa (6.3%), Southern district (6.2%), and Haifa (5.9%).

Other districts that experienced moderate year-on-year house price rises included Sharon (4.6%), Center and Jerusalem Periphery Towns (3.9%), Jerusalem (3.8%) and Tel Aviv (3%).

The country’s most expensive is in Tel Aviv, where the average price of owner-occupied dwellings was ILS2,573,100 (US$667,428) in Q1 2016. It was followed by Jerusalem at ILS1,822,300 (US$472,680) and Sharon at ILS1,799,800 (US$466,844). Qrayot Haifa had the cheapest housing in Israel, with an average price of ILS959,200 (US$248,804).

Israel has experienced dramatic house prices rises in the past eight years (with the exception of 2011), despite domestic political uncertainty, security threats, and the global financial meltdown. In fact, house prices have risen by 102% (69% inflation-adjusted) from 2006 to 2015.
  • The average price of owner-occupied dwellings rose by 4.1% (-0.47% inflation-adjusted) in 2008
  • Property prices rose by 22.35% (18.15% inflation-adjusted) in 2009
  • Property prices rose by 17.04% (14.16% inflation-adjusted) in 2010
  • Property prices rose by just 0.04% in 2011, but when adjusted for inflation, prices actually dropped 2.39%
  • Property prices rose by 5.82% (4.12% inflation-adjusted) in 2012
  • The average price of owner-occupied dwellings rose by 7.38% (5.38% inflation-adjusted) in 2013
  • Property prices rose by 7.21% (7.41% inflation-adjusted) in 2014
  • Property prices rose by 5.99% (6.88% inflation-adjusted) in 2015

The main reason for the continued rise in house prices is the supply shortage, due to low construction volumes. Other factors contributing to the house price boom have included the central bank’s expansionary monetary policies, and the lack of alternative investment options.

“Real estate accounts for 19% of gross domestic product directly and another 13% indirectly,” says Elli Kraizberg, a professor at Bar-Ilan University. “Real estate accounts for not less than 40% of the public’s total wealth.”

Israel house pricesNationwide house prices are expected to continue rising in coming months, amidst strong demand, coupled with the housing supply shortage.

The economy is expected to expand by 2.8% this year, after growing by 2.6% for both 2014 and 2015, 3.3% in 2013, 2.9% in 2012, and 5% in 2011, according to the Bank of Israel. The Bank of Israel kept its benchmark interest rate at a record low of 0.1 in May 2016, in an effort to boost economic growth while maintaining price and financial stability.

Analysis of Israel Residential Property Market »


RENTAL YIELDS
Last Updated: Aug 30, 2015



Gross rental yields i.e., the rental return on a property if fully rented out, before all expenses, are poor - almost at Monaco-like levels. Gross rental yields for apartments in Tel Aviv are under 3%.

This tends to support the popular view that property is somewhat overpriced in Israel.

Apartments in upscale residential areas of Tel Aviv cost on average US$ 11,500 per square metre (sq. m). A 120 sq. m apartment now costs around US$ 10,700 per sq. m., whereas three years ago, it only cost around US$ 7,800 per sq. m.

These are the sort of prices that can be seen in Swiss cities of Geneva and Zurich, or in Canada’s Toronto and Vancouver.

Renting an apartment in Tel Aviv would cost you anywhere from US$ 21 per sq. m. per month to around US$ 28 per sq. m. per month, which means that you can rent an 80 sq. m. apartment for about US$ 2,250 per month, and a 120 sq. m. apartment for around US$ 2,800 per month.

Read Rental Yields  »



TAXES AND COSTS
Last Updated: Feb 23, 2016



Rental Income: Rental income is taxed in Israel. Taxpayers can opt for a flat 10% tax on gross rent (without any deductions), or progressive income tax rates on net income.

Capital Gains: Most properties sold in Israel are exempt from capital gains tax. If the gains are taxable, the net gain is taxed at the standard income tax rates.

Inheritance: Israel has no inheritance tax.

Residents: Resident individuals are taxed on their worldwide income and capital gains at progressive rates.

Read Taxes and Costs  »



BUYING GUIDE
Last Updated: Feb 15, 2015



Roundtrip transaction costs, i.e., the costs of buying and selling a property, are around 6.236% to 7.236% 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.

Read Buying Guide  »



LANDLORD AND TENANT
Last Updated: Jan 01, 1970


Tenancy laws

Research in this field is on-going.

Read Buying Guide  »



ECONOMIC GROWTH
Last Updated: Jul 15, 2016


Modest economic growth; very low unemployment

Israel luxury modern housesThe economy expanded by 2.6% in 2015, after annual growth rates of 2.6% in 2014, 3.3% in 2013, 2.9% in 2012, and 5% in 2011, according to the IMF.

Then in the first quarter of 2016, Israel’s economy grew at an annualized rate of 1.3%, as slowing global trade weighed on exports, according to the CBS.

In Q1 2016:
  • Exports fell by 1.1%
  • Government spending dropped 1.6%
  • Private spending grew 4.8%
  • Investments in fixed assets rose by 16.2%


The economy is forecast to expand by around 2.8% this year, according to the Bank of Israel.

Israel’s unemployment rate fell to 4.8% in May 2o16, its lowest level since 1983, according to the CBS. Some economists believe this to be the “natural rate of unemployment.” The country’s unemployment rate has been generally declining since 2003.

Israel, GDP growth“The jobless rate is not only low historically but low by international standards, and by conventional economic definitions there’s no unemployment at all in Israel,” said Moti Bassok of Haaretz.

Wages have been rising at a 5% annual rate since the beginning of 2016. Currently, the average monthly wage in Israel stand at ILS10,128 (US$2,645).

Inflation was -0.8% in May 2016, from -0.9% in April, -0.7% in March, and -0.2% in February, according to the CBS. Inflation stood at 0.6% in 2015, up from 0.5% in 2014, but down from 1.5% in 2013, 1.7% in 2012, and 3.5% in 2011, based on figures from the IMF.

In 2015, the country recorded a budget deficit of ILS24.5 billion (US$6.25 billion), representing just 2.15% of GDP – the smallest deficit since 2007, according to the Finance Ministry. The budget shortfall is expected to fall further to ILS14.1 billion (US$3.7 billion) next year.

Israel’s net public debt was equivalent to 61% of GDP in 2015.







  • Moderate yields in Tel Aviv
  • Low to moderate transaction costs
  • Low effective rental income tax
  • Low recent GDP growth
  • Minor property ownership issues
  • Several conflict areas
RESIDENTIAL PROPERTY FACTS
Price (sq.m): $10,166 For a 120 sq. m. property, usually an apartment.
Rental Yield: 2.28% For a 120 sq. m. property, usually an apartment.
Rent/month: $2,318 For a 120 sq. m. property.
Income Tax: 7.75% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 6.74% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000.
Cap Gains Tax: 48.00% Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord and Tenant Law: Neutral Rating is based on a detailed study of each country’s law and practice.

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