Buying Property In Israel

Purchasing property in Israel may differ a little or lot from the experience in your current location. The way property is described, measured, and how transactions are handled are likely to have at least some differences.

Property descriptions are a bit unique. For example, floor identifiers and the number of rooms can be surprising. Buildings in Israel usually have an entry floor numbered zero. The first floor is one above the entry level, and floors below the entry level are numbered -1, -2, etc. Apartment buildings may have several entrances, so the postal address and visitor instructions need to include the building entrance number. The number of rooms mentioned generally only includes the number of bedrooms plus one room as the living/dining area. Kitchens are not numbered among the rooms, so a 5-room home has 4 bedrooms, a 3-room apartment has 2 bedrooms, and so on. Area is measured in square meters. One square meter is between 10.7 and 10.8 square feet. Indoor space described in square meters generally includes all space, but local government measurements usually include only living space and exclude the area taken up by interior walls, etc. This legal measurement is used in calculating municipal taxes, so the difference can be significant.

The type of home is often described as follows:
Apartment – one apartment in a building of 2 or more units.
Cottage – an individual unit attached on one or both sides, to other cottages, often with two floors.
Duplex – a two-story building with one or many units.
Garden Apartment – an apartment on the entry level, with a private or shared-access outdoor area.
Penthouse – an apartment atop a multi-unit building with significant private roof access.
Roof Apartment – an apartment atop a multi-unit building with limited or no private roof access.
Semi-Detached – a one-family or two-family home with one wall against the adjacent building.
Triplex – a three-story building with one or many units.
Two-Family – one building with two apartments, usually on separate floors.
Villa – a free-standing single-family dwelling, usually including a garden area.

Buying property in Israel does not involve an escrow company, such as those in many places, where the escrow company handles transfer of funds and property between the buyer and seller. Likewise, title insurance is not an option in Israel. A lawyer handles the exchange and title research, so it is important to have a competent attorney who is well-versed in real estate law. The attorney’s fee may be a flat rate or percentage of the purchase price, and buyers and sellers each pay their own attorney’s fees.

Buyers and sellers usually share the cost of real estate broker/agent fees, which average 2%, but can be as high as 4%. Most real estate brokers in Israel will cooperate with other brokers, so there may be one broker for the seller and another for the buyer, but there are times when one broker represents both buyer and seller.

There is a purchase tax on buying property valued over about NIS 1.6 million in Israel, but new immigrants and Israeli residents who are first-time buyers are eligible for discounts as of this writing. Your attorney can research what benefits apply, and arrange the necessary documents. Foreign buyers and those who will own more than one property pay the highest purchase taxes. Property purchase tax rates begin at 3.5% of the amount over NIS 1,623,320, and increases to between 5% and 10% for the highest-priced properties.

Property tax is restricted to a municipal tax, known as Arnona. Each municipality has its own rates, and Arnona fees fund most public services, including municipal operations, sanitation, and maintenance. The rate is usually calculated based on several factors, including location, building type, and the inhabitable area measurement mentioned above. New immigrants are often granted special discounts on Arnona for some period after arrival.

Israel has a value added tax (VAT) on services, so broker fees, attorney fees, and other services have a tax that is currently 17%. Buying property in Israel may also involve fees for loan generation or transferring funds from overseas, and there is a fee associated with recording the purchase.

Property ownership registration in Israel is handled by the Department of Justice’s Land Registry. Registration is not immediate, and it is not rare for many months to pass before ownership registration is completed. To avoid potential risk and fraudulent transactions, the purchaser’s attorney blocks any other parties from registering ownership of the property until the buyer’s rights are recorded. This means that the property may not be in your name for a while, but nobody else can claim it while your registration is in process.

Buying property in Israel may be different from your previous experiences, but with the right information and professional assistance you can be prepared. By asking the right questions about professional fees, taxes, loans, transfers, and other points mentioned above, buyers can plan accordingly and avoid negative surprises. It may appear a bit unfamiliar, but buying property in Israel is an orderly and predictable process you can navigate successfully with the right information and assistance.