Israel: Overview

RENTAL YIELDS

Last Updated: Aug 18, 2008

Tel Aviv yields are poor to moderate

Apartments in Tel Aviv have yields from 4.23% to 5.13%. Down 2.3% from the previous year, rental yields are now at an average of 4.7%. Yields are highest for 120-square metre apartments, with a monthly rent of around US$21.73 per sq. m.

Apartment prices average around US$5,700 per sq. m. Properties of 90 sq. m have the lowest yields and prices, selling at an estimate of US$5,086 per sq. m.

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TAXES AND COSTS

Last Updated: Nov 28, 2008

Effective income 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. 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, from 30% to 47%.

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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

Last Updated: Aug 08, 2008

Rapid economic growth despite political conflicts in Israel

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 controlled by the Palestinian Arabs and the remaining 55% by the Israeli Jews. This partition was not accepted by the Palestinians. They lost the ensuing war, and large numbers of Palestinians were driven from their homes 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 several wars including the Intifadas (1987 and 2000) and the Lebanon wars (1982 and 2006). The recent war between Israel and Lebanon-based Hezbollah ended in August 2006 with a UN resolution declaring an immediate ceasefire. However, peace is not assured due to continuous conflict between the Palestinians and the Jews.

Despite prolonged political struggles and security threats, Israel’s economy still managed to grow rapidly. The country has capitalized on its highly skilled and educated workforce, on enormous financial aids from the US, and investments from wealthy Jews abroad.
The country’s economy is technologically advanced. The telecommunications, semiconductor, and software industries symbolize Israel’s dominance in information technology.

The country’s GDP growth has been stable for the past years. In 2007, the economy grew 5.3% and GDP per capita increased by 3% to ILS92,248 (US$26,519) from a year earlier. The GDP is expected to grow by 4.2% this year despite the global financial crisis.