WIRE Consulting, an independent company specialized exclusively in international real estate services, speaks to the American investor, addressing the Pros and Cons of buying property in Tel Aviv.
Despite the geopolitical landscape of the area, Israel seems to be an ever-growing nation, witnessing only a small drop in GDP within the last decade. The same uptrend can be said about residential properties prices, due to the fact that Israel is perceived by international investors as a country exposed only slightly to major risks, thanks to its diplomatic ties and recognition as a regional leader.
One of the more appealing aspects for the real estate investor is the favorable Israeli taxation system which excludes capital gain tax, with the exception of some peculiar cases, inheritance tax and formal property tax.
Although, there are issues investors must keep in mind if, and when, planning to invest. The high property prices show there is no room for substantial appreciation in the medium-term in a city where house price to rent ratio is one of the highest worldwide. The government owns most of the land available for construction and implements policies which have a strong impact on the market and selling land to contractors at a discount with the clause that they will sell the finished building at a below-market price.
Affordability of houses for locals (considering the mean household salary) is much lower than the majority of European and US cities. This is particularly true in Israel’s two main cities (Jerusalem and Tel Aviv) where the public debt is only 60% of the GDP.
In 2017, 40% of real estate transactions were done by foreigners in central areas of Tel Aviv, where it is easy to obtain a mortgage from local banks with the property as the only guarantee. The LTV is around 40-50% and interest rates are in line with the yields obtainable from renting, which are slightly under 4%.
Wire Consulting outlines to its clients the three main ways to invest in Tel Aviv real estate. Buying land and building a new development, restructuring an existing building whose average reconstruction price ranges from $90 to $135/sq. ft. in a luxury building, and demolishing an existing old property and building a new one.
SOURCE WIRE Consulting