“If I am looking to make aliyah in the next five to 10 years, do I buy then or should I be looking to buy now?”
This is a common question I get from many of my clients. There are a few factors to consider in this scenario.
Purchase Tax vs. Market Prices
From a tax perspective, if you are not becoming a resident of Israel, you need to pay a minimum of an 8% purchase tax. However, if you make aliyah and change your residency, currently, you receive a large discount from this tax when buying your first home.
Despite this, we do not know what the law will be in five to 10 years and, furthermore, the amount you will save by avoiding that tax will not nearly make up for the rise in prices in the market. So, by waiting to save on the tax, you quite possibly will end up spending a lot more on market prices.
How Do I Know Where to Buy?
Many times, people are advised to first come to Israel and wait to buy until they take a pilot trip or to rent first and buy after to ensure they are buying in an area that they like. This advice is not wrong, per se, but there is an advantage to getting into the market as early as possible.
If you buy something that does not tick most boxes (for example, fourth floor with no elevator), that will probably not benefit you. However, presuming the market continues in its current trend, if you buy something practical, even if you decide that you do not want to live there, it should be easy to sell or rent out. However, in my experience, people end up loving what they originally bought.
Mortgages
Another crucial factor to consider is mortgages. If you change your residency to Israel, you can, subject to qualification, borrow up to 70-75%, in contrast to the 50% rates as a foreigner. However, in Israel, they do discriminate against age—meaning they would like your mortgage to be paid off by around age 80. By waiting seven years to buy, that could be held against you in terms of how long they give you a mortgage for, and your rates could be higher. Lastly, taking a mortgage once you retire may be a lot harder in comparison to when you have a steady income, as banks in Israel lend based on income.
Conclusion
Due to all these factors, in my opinion, buying into the market as soon as possible is sensible and practical, as opposed to waiting to make aliyah. Hopefully, the apartment you purchase will be the home you live in and begin to build your life in here in Israel; however, if it doesn’t work out that way, at least you have a foot in the door and can use that time to find something more suitable.
To contact Ben with any questions email [email protected].
Ben Levene is CEO and director of sales at CapitIL Real Estate.
