By Ben Levene and Heskel Balas
I was reading a Globes article sent to me by a client of mine from New York this week. The most interesting fact from the article was the struggling high end of the market in Jerusalem today. According to the article, only 14 residential deals of over 8 million NIS were completed last year.
The first important question is: Why?
I can suggest a number of reasons. The tax of more than 8% on foreign residents means that except for the extremely wealthy, many purchasers in this bracket still need to think first before taking on a tax this size. Therefore, they either buy at the lower level or don’t buy at all.
People who buy for a vacation home and were looking at $2.5–3.5 million are either being much more patient in finding the right thing, holding out to find a special or the right property, or are reducing budgets to buy slightly more manageable units in the 5.5–7 million shekel range (approximately $1.5–2 million).
The best bit about the recent data is that people looking to buy at the highest end have the option to pick from a wide choice of available options—this has not always been the case. The article cited statistics showing approximately 40–60 foreign purchases a month in Israel, representing only around 3 percent of the total sales on the current market versus the nearly 10 percent nine or 10 years ago.
My analysis of this is that the tough purchase tax, the tightening of moving money to Israeli banks, and world economic circumstances have really hit the foreign-purchasers market. I feel that the understanding of the above points and the adjustment of the buyers’ mindsets might well start to slowly lead to increases in foreign purchases over the next one to five years.
Ben Levene is sales director of CapitIL Real Estate Agency and is a licensed real estate agent in Israel. CapitIL is located on King David Street in Jerusalem. Email email@example.com, call 646-781-7745, or visit CapitIL.com to learn more.