Purchasing property in Israel involves several costs beyond the property’s price. Here’s an updated overview of these expenses, reflecting the latest changes as of January 2025.
1. Purchase Price and Initial Deposit
The primary expense is the property’s purchase price. Buyers typically provide an initial deposit ranging from 10% to 30% of this price.
2. Value Added Tax (VAT)
As of January 1, 2025, Israel’s standard VAT rate has increased from 17% to 18%. citeturn0search9 This tax applies to various goods and services, including certain real estate transactions.
3. Purchase Tax (Mas Rechisha)
Purchase Tax is a significant expense when acquiring property in Israel. The rates vary based on the buyer’s status and the property’s value.
- **Israeli Residents (First Property):**
- 0% on the first NIS 1,919,155.
- 3.5% on the amount between NIS 1,919,155 and NIS 2,276,360.
- 5% on the amount between NIS 2,276,360 and NIS 5,525,070.
- 8% on the amount between NIS 5,525,070 and NIS 18,416,900.
- 10% on any amount exceeding NIS 18,416,900.
- **Investors (Second Property):**
- 8% on the first NIS 5,525,070.
- 10% on any amount exceeding NIS 5,525,070.
- **New Immigrants (Olim Chadashim):**
As of August 15, 2024, Olim benefit from reduced Purchase Tax rates for their sole residential property:
- 0% on the first NIS 1,978,745.
- 0.5% on the amount between NIS 1,978,745 and NIS 6,000,000.
- Standard tax rates apply to amounts exceeding NIS 6,000,000.
These benefits apply only if the property is the Oleh’s sole residence and is priced up to approximately NIS 6 million. citeturn0search1
4. Legal Fees
Engaging a lawyer is mandatory for property transactions in Israel. Legal fees typically range from 0.5% to 1.5% of the purchase price, plus VAT.
5. Mortgage-Related Costs
If financing the purchase with a mortgage, consider:
- Bank Fees: Arrangement fees usually range from 0.25% to 1% of the loan amount.
- Valuation Fees: Banks may require a property appraisal, costing between NIS 2,000 and NIS 3,000.
- Mortgage Insurance: Lenders often require life and property insurance, with annual premiums varying based on coverage.
6. Real Estate Agent Fees
Real estate agents typically charge a commission of around 2% of the purchase price, plus VAT.
7. Property Survey and Inspection
Hiring a professional to inspect the property is advisable, especially for older buildings. Inspection costs range from NIS 2,000 to NIS 5,000.
8. Renovations and Repairs
Budget for potential renovations, with costs varying widely based on the scope of work. Minor updates may cost around NIS 10,000, while extensive renovations can reach several hundred thousand shekels.
9. Moving Costs
Moving expenses, including hiring movers and setting up utilities, can add up to several thousand shekels.
10. Currency Exchange and Transfer Fees
For foreign buyers, currency exchange and international transfer fees are considerations. Utilizing specialized currency exchange services can help minimize these costs.
11. Ongoing Costs Post-Purchase
After acquiring the property, anticipate ongoing expenses such as:
- Arnona (Property Tax): Rates vary by municipality and are based on property size and type.
- Management Fees: Monthly maintenance fees (Va’ad Bayit) apply for properties with shared facilities.
- Insurance: Comprehensive property insurance is essential for protection against potential risks.
12. Registration Fees
Fees for registering the property with the Land Registration Bureau (Tabu) or the Israel Land Authority typically amount to a few hundred shekels.
Budgeting Tips
- Plan for Extras: Allocate at least 10% to 15% of the property price for additional costs.
- Work with Professionals: Engaging a reliable lawyer, real estate agent, and financial advisor can save time, money, and stress.
- Stay Informed: Regularly check for updates on tax rates and regulations to ensure accurate budgeting.
Conclusion
Purchasing property in Israel involves various expenses beyond the property’s price. Understanding these costs and recent changes, especially concerning Purchase Tax benefits for new immigrants, is crucial for effective financial planning. Consulting with professionals and staying informed about current regulations will facilitate a smoother property acquisition process.
