Last month the Rabinovich Committee released its
recommendations for the property tax reform, effectively
bringing the housing sales market to a halt. The committee
recommended eliminating the purchase tax at the 0.5 percent
level, eliminating the sales tax and reducing the capital
gains tax.
The release of the committee's decisions created a real
dilemma for many prospective buyers: Should they go ahead and
buy the apartment (perhaps promised to the young couple) or
should they wait for the Finance Ministry's decision on the
proposed changes?
Now more than ever the average home buyer finds himself
completely overwhelmed by the complexity of the market and
the results are apparent in the field. The purchase of
apartments for investment purposes has ceased almost
entirely, even though returns have increased dramatically, as
rents have held steady or increased while the prices of
apartments have fallen all over.
Meanwhile the cycle continues and rent prices have shot up as
a result of the housing shortage. Whenever a large number of
apartments become available for rent, it is a sure sign that
the sales market will freeze up, as many prospective buyers
become fence sitters and rent instead of buying.
How can we make such a major decision and lay out so much
money, wonder potential buyers, when the government is
dragging its feet regarding the new housing policy?
If you too have put your purchasing plans on hold until a
final decision is reached on the Rabinovich Committee's
recommendations, you should know that the Housing Minister
has already promised that any tax breaks will be implemented
retroactively, from the day the Rabinovich Committee
decisions were released. Thus even if you purchase now you
should not have to forego anticipated tax benefits.
On the other hand, since the housing market is not expected
to recover in the coming year, apartment prices are not about
to increase. So if you were told that now is the time to buy
because apartment prices are at a low and the market appears
bright and promising -- no need to rush. Low prices are
relative and they could drop much lower.
No singular recommendations can be made, particularly in the
area of apartment purchasing, which has always been known to
be based largely on personal feelings. If you come upon a
real find and have the cash rustling in your pocket -- and
maybe the young couple is waiting on the threshold -- then
get a good lawyer and sign on the dotted line. Otherwise your
find will probably be discovered by someone else and snatched
up right away.
The small number of construction startups has limited the
supply of apartments, but even if the big purchase has yet to
be made, you have nothing to worry about -- you'll get the
tax benefits in another two months. Housing Minister Natan
Sharansky claims that now is the best time to buy an
apartment in Israel since 1992.
