Written by: Chloe Smeader
Purchasing land in Israel as a foreigner offers a chance to invest in a country steeped in history, culture, and economic growth. While acquiring land may seem difficult due to legal complexities, the Israeli government has implemented strategies to facilitate foreign ownership, allowing non-residents to participate in the nation’s dynamic real estate market. Below are some key considerations, positives and negatives of buying land, requirements for purchasing land, and also specific reasoning on why you should consider purchasing property in Israel.
Investing in land as a United States citizen:
Investing in Israel as a foreigner, including United States citizens, presents a great opportunity for all, particularly in the current standing where the population is increasing, and available property is becoming harder to obtain. This market situation makes it an ideal time to purchase land or property in the country. Israel’s economic stability ensures a successful investment in private real estate. The process for foreign investors is relatively straightforward, requiring the acquisition of appropriate paperwork to jumpstart your transaction. However, when transferring significant sums of foreign currency for payment, it’s essential to know that there are potential transfer and conversion fees.
Documents needed to purchase land:
Since it is accessible for U.S. citizens to purchase land in Israel, there are a few documents you will need to collect in order to be eligible to obtain property. You will need a registration of ownership in the buyer’s name, land tax planning, drafting/examination of the purchase/sale agreement, the existence of the building permit, and avoiding construction deviation. Other important information to collect would be identifying the seller/developer and examining the seller’s/developer’s rights to the property sold: mortgage, seizure, third-party rights, etc. Once these documents are collected, acquiring land should be smooth and straightforward.
Other requirements needed:
It is very important when looking to purchase property that you consider the type of community and area you want to be in. Prices of this transaction can vary due to legal fees, location, your real estate agent’s commission, foreign currency transfer fees, and the Purchase and Capital Gains Taxes. It is essential not to overlook these two taxes. The Purchase tax (Mas Rechisha) is a graduated tax based on the home’s value, which in most cases, must be paid within 60 days of signing a contract. This tax is calculated by dividing the total purchase price into various brackets, with a different rate applied to each. There is also the Capital Gains Tax (Mas Shevach), also known as the Land Appreciation Tax means that when you are selling your property in Israel for more than you originally purchased it for, you are obligated to pay somewhere around 25% at the most on the net gain.
Opening a bank account:
When starting the process of obtaining property, it is important to start a bank account in Israel. Foreign citizens do have the right to open a bank account, but some issues commonly arise when transferring funds. To resolve these problems, the account owner must explain the intention of transferring money. Sometimes you must provide the bank with certified constituent documents, a contract or other appropriate documents proving the authenticity, or even a loan agreement. If this option does not work, you have the option to open a trust account instead. while foreign citizens have the right to open bank accounts in Israel, they must be aware of the potential challenges related to fund transfers.
The positives and negatives of foreigners being able to purchase land:
Since someone looking to buy private land in Israel does not have to be a citizen or resident of Israel, it creates many issues regarding Israel’s sovereignty. A positive aspect is that any Jew can purchase land in Israel no matter where they reside, but this law is not only applicable to Jewish people, which is where a problem arises. Many people who do not support a Jewish state in Israel have purchased private land in Israel, knowing about this flaw and hoping to prevent the freedom of Israel. Around 93% of Israel’s land is directly owned by the state, which initially protected the Jewish state. That means that only 7% of the remaining land is privately owned. Land owned by the state can only be bought by an Israeli citizen or a foreign who is eligible to make Aliyah. This structure becomes less practical as the population increases and property price rises.
Why should you buy land in Israel:
Currently, there are plenty of reasons why investing in land in Israel is a strategically sound decision. The nation is experiencing a rapid population increase, with people from all over moving to the country, resulting in high demand for housing. However, due to Israel’s relatively limited size, the availability of land for purchase is increasingly scarce. As a result, land acquisition can be an excellent investment, as the housing demand is likely to affect property values significantly. Israel’s stable economy has made it an attractive location for investors seeking to secure property. Over the past four decades, a consistent pattern has shown a steady increase in housing prices, signifying a long-term trend in growing property values. The past trends often align with the future, suggesting that property prices will likely surge as land availability decreases. Therefore, a land investment could be an excellent investment in the coming years as the demand for housing persists and property values climb. The combination of factors such as population growth, limited land availability, a strong and stable economy, a history of rising property prices, and an influx of immigrants all make the current market conditions highly favorable for investing in land in Israel.
Israel welcomes US citizens who wish to invest in land. Buying property in Israel is permissible, provided that potential buyers follow the necessary procedures and meet all requirements. Acquiring land involves completing the required paperwork, gaining proper approval, and correctly transferring your funds. Where you are registered as a citizen will not affect any translation pertaining to land or property.
If you have any questions regarding purchasing land in Israel as a United States citizen, please do not hesitate to contact our law offices in Tel Aviv and Jerusalem.