City Center Developments

Israeli property investors are watching with interest the process of approving new residential city center developments on the sites of former bus stations in cities across Israel. Herzliya is the first such city center development to receive planning permission, but others will follow.

Many Israeli cities have relocated their main bus stations, leaving city center sites that are ripe for development. In Herzliya, Nitsba have just received permission to build 400 apartments on the site of the former central bus station. Nitsba is owned by Haim Tsuff, one of Israel’s leading developers, as a subsidiary of the Airport City company and Jerusalem Oil Exploration Ltd. They also own the development rights to 18 other bus stations around Israel, and they are also involved in building a new industrial park in Rosh HaAyin together with 1,200 residential apartments.

Although the central Herzliya bus terminus was closed in 2016, the local planning committee granted initial permission for the site’s development back in 2010, but final permission was only given in July 2018. The new project will be called Herzliya Park and is planned to include a number of towers containing 400 apartments which are expected to cost at least NIS 900,000 per apartment.

The story of this project and the potential development of further city center sites is typical of the many bureaucratic delays that hamper real estate developments in Israel. It may take decades for permission to be granted for the development of the other central bus station sites around the country. While home prices continue to rise, the building of residential apartments in many city-center sites are delayed by the planning process.

At the same time, the process of upgrading much of Israel’s sub-standard housing stock to meet the latest building standards, is also taking longer than expected. The TAMA 38 program was devised to upgrade buildings that stand on concrete stilts to survive potential earthquakes. Uptake of the program by residents has been extremely slow, because of the inconvenience of moving out while your building is renovated. This has held up the building of extra apartments in city centers, and has also left many buildings vulnerable to quakes.

Recent Israeli government programs to manage the demand for new homes have not been matched by any significant increase in the supply of new apartments, particularly in Israel’s most sought-after central cities. Apartment prices remain high, particularly in the Mercaz and Sharon districts. The highest increases in prices in recent months have been recorded in Rehovot, Jerusalem and Netanya.

Investors are watching with interest the process of approving residential developments on the sites of former bus stations, and also the development of new light rail stations across Central Israel. It is important to stay in touch with what is happening and also what may happen in the future, even if it may take time for planning permission to be given, so as to get in on the ground floor of exciting potential developments.

If you are interested in buying property in Israel, or consulting with Creative Estates about the management of your investment property, we would be delighted to help you. You can contact us in complete confidence at contact@CEIsrael.com

Saving Landlords Money

Creative Estates is all about saving landlords money, particularly absentee landlords who do not live in Israel. We can help to reduce landlords’ Israeli tax liability and make successful insurance claims.

One of the issues that many non-Israeli landlords are not aware of is the options that exist for reducing their Israeli tax liability. Since all income earned in Israel is liable to taxation, even a property owner who lives overseas is obligated to file and pay income tax on their rental income. It is crucial to take expert advice on how to take care of this properly, particularly if you want to make sure that you are not taxed twice on the same income – first in Israel and also in your own domicile.

Shaun Isaacson, CEO of Creative Estates Israel, is a qualified lawyer and MBA who understands all the ins and outs of income tax. “We are usually able to reduce our clients’ tax liability with careful management of their finances”, he explains. “One of our overseas clients had been paying 10% tax on his rental income, but in consultation with our accountant we were able to reduce his liability to zero by offsetting the depreciation on the value of his property. Any landlord who does not take advantage of our expert advice risks losing money that can easily be saved!”

Creative Estates specializes in saving its clients from getting ripped off by unscrupulous contractors and making short-sighted decisions. “The polite Israeli expression for this is “fryer” – it means someone who is naïve and easily taken advantage of. Insurance companies are notorious for taking advantage of innocent landlords who do not realize that they need to negotiate more aggressively to get the pay-out that they legally deserve”, says Shaun.

“Shimon was managing his own property in Kfar Saba from his home in Canada. He called us one day because a number of pipes under the floor had burst and he didn’t know who to trust to fix them properly. Our maintenance crew took care of it and we took over management of the property. We then turned to his insurance company to make a claim for the costs of repairing the water damage.

“It took a few phone calls and we had to state our case very strongly in order to convince them that we were not willing to settle for their low offer. Being an Israeli lawyer by training meant that the negotiation was easier for me than it would have been for Shimon! Speaking Hebrew like a native means that the person on the other end of the phone does not think that they can get one over on me!”

Shimon’s apartment had clearly been built with sub-standard copper piping, and there were further pipe bursts. Creative Estates took care of them one by one, replacing them with stronger plastic piping so that the problems would not recur, and making successful insurance claims to cover the cost of the work. Not only did we save Shimon a fortune in repair costs, but he also saved on the air fares that he would otherwise have incurred to visit his property and take care of the problems.

Another client, Graham, recently wrote to us: “I have had a home in Israel for over 26 years and my only regret is that I only met up with Shaun two years ago! He is without doubt one of the most professional , efficient, trustworthy and organised person I have met. Nothing is ever too much trouble, no job is too small.”

Many absent landlords are recognizing that deciding not to use a property management company in Israel will cost them more money than paying someone to take care of their interests. We have proven time and time again that taking care of insurance claims and taxation issues on behalf of our landlords can save them a great deal more money than we charge.

Don’t be a fryer! Talk to Creative Estates Israel about managing your property in Israel. We’ll take away your headaches and ensure that tenants are happy, your property is well maintained, and your investment is profitable!

Israel’s Next Hot Property: Lod

People always ask us about where they can invest in real estate and see an increase in their returns. At Creative Estates we are not ‘profit prophets’, but we do keep our eyes and ears open for new developments that suggest which of the more affordable areas of Israel may be ripe for investment.

Lod is a city in central Israel that has been largely neglected until now. It is located just 30 minutes south of Tel Aviv but it has not been attractive to commuters. During the 80s and 90s it was known for violent crime, and it has a delicately balanced demographic make-up of 70% Jewish and 30% Israeli Arab residents. However, recent campaigns to clean up the city have been successful and people are recognizing its potential. Housing prices have been rising rapidly and there are new plans for municipal development.

Lod is traditionally associated with Israel’s first airport, which was known as Lod or Lydda until 1973, when it was renamed in honor of David Ben Gurion. Although the airport is located outside the city boundaries, it remains one of the major employers of Lod residents, together with the many related companies that have grown up around the airport.

What’s New in Lod?

In May 2017, Israel’s Ministry of Finance agreed with the Lod municipality to help build 17,000 housing units in and around the city, as part of a major program of urban renewal. This includes upgrading the transport infrastructure, connecting the eastern and western suburbs to the city center, and including two former moshavim as part of the city.

Community regeneration projects include educational start-ups, a religious ‘garin’ scheme that provides educational support in the city’s schools, and numerous coexistence projects that have helped to ease the tensions between Arab and Jewish residents. The city’s mayor has a clear agenda to upgrade the city and its poor image. For example, when construction workers digging for a new road expansion program discovered a well-preserved mosaic floor dating back to the Roman period, they set up the Lod Community Archaeology Program to engage local students from five Jewish and five Israeli schools in the dig to reveal and restore the mosaic (shown here).

Property Prices in Lod

According to the Madlan website, the price of a typical 4-bedroom apartment in Lod is currently 1.16 million NIS – significantly lower than the national average (1.47 million NIS) and much lower than the average price for Central Israel (1.74 million NIS). Significantly, the Madlan index shows that Lod apartment prices have increased by 50% since 2013. Rental prices in Lod are relatively high, and you can expect a rate of return of between 3.2-3.8% on property rentals, depending on the location and state of your apartment.

So, if you are thinking of investing in an up-and-coming city that is conveniently located in  Israel’s lucrative ‘Mercaz’ region, we suggest that you look at Lod. At Creative Estates we would be happy to speak to you about your real estate investment plans and offer you our property management services. Contact us today.

 

Fixing Rain Damage in Israeli Properties

Rain in Israel is considered a blessing for the country, providing essential drinking water and helping local farmers, but rain is not a blessing when it enters your property. Creative Estates Israel CEO Shaun Isaacson explains why rain damage occurs in Israeli properties during the winter and how to fix it.

In many houses and apartments in Israel you will see damp patches on ceilings and external walls during the winter, with bubbling plaster and paint a common featureg. If you or your tenants notice that there is water coming through during the rainy season, you may want to send someone to check on the roof, window frames and walls.

Why Do Israeli Homes Leak in the Winter?

Leaks are a fact of life in many Israeli homes, old and new because Israeli buildings are made of poured concrete, stone and tiles, and rain water tends to find and infiltrate even the tiniest cracks. Because the dry, hot summer is significantly longer than the short, wet winter, homes are designed to stay cool and are poorly insulated. White walls, tiled floors, flat roofs and large windows are all excellent for summer living, but they present many challenges during the winter months.

In other countries where houses are constructed out of wood, the issue of water damage is much more serious because wooden beams can rot and collapse. However, in stone and concrete homes the water generally drains through the cracks and dries out, causing no long-term damage but only superficial patches.

Recurring leaks are hard to prevent because water may enter through a crack at one point in the external wall and emerge somewhere else inside, making it very difficult to identify and fix the source of the leak. Fixing one crack does not guarantee that further cracks will not open up, particularly where surfaces are exposed to baking hot sun for extended periods.

Fixing Leaks in Israeli Homes

Israelis love technology, so naturally they have created a solution for the problem of recurring leaks. It is a portable x-ray machine that sees through walls and identifies where the water is coming from. However, it is not a cheap machine and hiring the expert who can use it and read the results of the scan can be very costly. It is usually recommended to use this technology in situations where the source of the leak is hard to identify, in order to minimize the damage involved in opening up walls, floors or ceilings to fix the problem.

The problem of rain collecting on a flat roof is a familiar one, and it can be very difficult to fix the roof in such a way that rain water runs away from the cracks instead of collecting in the same places and making the cracks worse. Roofs – whether flat or tiled – generally only leak in the winter, so that is the busy season for roofing engineers. Calling a roof expert in the summer may be cheaper, but unless you have the roof fixed before the rains stop, it is impossible to know whether the fix that you are paying for is going to work or not. The best advice we can give is to call a recommended roofer as soon as you see any sign of water penetration, so that it can be fixed before the damage gets worse and you can see that the water is no longer coming in.

Leaks around your property can be aggravated by blocked external drains, including in the frames of patio doors, which can fill with water and leak into the house. It is worth noting that holes made in the external walls – for example, where planters or hammocks have been hung from hooks – can invite water inside. In properties facing the sea, the problem of water damage is compounded by the corrosion caused by salt in the water.

Managing Mold in Israeli Apartments

Whilst water damage to paintwork is unsightly, the real problems arise when mold starts to grows on the wet plaster. Mold is troublesome because it can be toxic and can cause health problems. People who live in damp and moldy environments can suffer from throat irritation, coughing or wheezing, eye irritation, or skin irritation, and some people have mold allergies which cause more severe reactions. Black mold must be cleaned off damp walls so that its harmful spores do not spread. It usually cleans off easily with a diluted bleach solution or a mold removal spray, sold in Israeli supermarkets.

The property owner is responsible for fixing leaks, but tenants have a responsibility to mitigate their effects by informing the landlord or property manager and by keeping the property ventilated. Ventilation is crucial to prevent the development of mold and to help wet plaster to dry out between rain storms. However, tenants are often reluctant to leave their windows open in the cold, wet weather. A good property manager will keep an eye on this issue and recommend adding air vents if they see that a room is becoming moldy in the winter.

You will probably want to replaster the walls and ceilings to fix the damage from a leakg, but it is always best to wait for rain damage to dry out completely before plastering and repainting. Remember that the last rains in Israel may only happen in April, so don’t rush to the paint store too soon!

Repainting in the Spring

Recurring rain damage from leaks has given rise to the tradition in Israel of repainting the interior of your home every spring with white paint. It also explains why white is the most popular color for internal walls – not only does it help keep homes cool in the summer, but white paint is much easier to match than other colors!

It may also be a good idea for property owners to paint the outside of the building with waterproofing chemicals, particularly if the building is covered with Jerusalem stone. Although the indigenous yellow limestone is beautiful, giving Jerusalem its legendary golden glow, it is actually porous and not particularly helpful in protecting your property against the rain!

Creative Estates Israel has a team of maintenance experts who spend most of the winter months attending to leaks and water damage, and then repainting the properties that they manage. Contact us about managing your Israel property today.

Israel’s New Commuter Network

The new network of light rail lines across the Tel Aviv Metropolitan Area will not only relieve traffic congestion throughout central Israel, but it will also change the real estate market in the towns that it connects.

The long-awaited Tel Aviv Metropolitan Area Mass-Transit system is now under construction, starting with nine underground rail stations being built in central Tel Aviv along what is known as the Red Line. These stations will be connected by a light rail network across the city, with multiple train lines reaching out to connect the surrounding suburbs and towns, in addition to and intersecting with the existing bus route network.

real estate opportunities

NTA – Metropolitan Mass Transit System Plan for 2024

Tel Aviv–Jaffa is already Israeli’s largest metropolis, having absorbed many of the surrounding towns into its suburbs. The planned train system will enable commuters to live and work in different towns and to travel to work on public transport instead of sitting in traffic jams.

The Red Line will connect Petach Tikva, Bnei Brak, Ramat Gan, Tel Aviv–Jaffa and Bat Yam. The next line slated for construction is the Green Line, connecting Herzliya, Tel Aviv, Holon and Rishon LeZion. Simultaneously, work will start on the Purple Line, connecting Yehud, Or Yehuda, Ramat Gan, Tel Aviv, Kiryat Ono, Givat Shmuel and Petach Tikva. The Green and Purple lines are planned to open in 2024. Four additional lines are planned, eventually connecting more towns to the commercial heart of the country.

Tel Aviv’s New Red Line

The Red Line will be the first to open, hopefully in 2021. It will start in Petah Tikvah and continue along Jabotinsky Street in Bnei Brak, and through Ramat Gan. The tracks will continue to the Arlozorov train station, run along Begin Street and near the Azrieli Center, from where they will head south of the Kirya to Manshiyya and Jerusalem Boulevard in Jaffa, ending in the southern suburb of Bat Yam. In the future the line may be extended to meet the Moshe Dayan road interchange in Rishon LeZion.

The Red Line will cover a route of 24 kilometers, including 11 kilometers of underground lines running beneath the streets of  Tel Aviv. Twenty-four of the stations will be above ground, and 10 are being built underground. The plan is for trains to run 90 seconds apart during rush hours, and three to four minutes apart during off-peak times.

Planning Ahead

Anyone considering investing in real estate in Israel should check out the plans for the various rail lines and look for properties within walking distance of the planned stations. There is no doubt that proximity to the Tel Aviv Metropolitan rail network will increase the purchase and rental value of properties as commuters discover the benefits of light rail travel in Israel.

Talk to Shaun Isaacson today about opportunities for great real estate investments in Israel, and how we can help you to purchase and manage your properties in Israel for profit.

Cleaning House in Israel – 7 Essential Products

Creative Estates Israel manages many rental properties in Israel and sends in teams of professional cleaners between rentals and before owner visits. We asked our cleaning crew for the 7 best cleaning products for cleaning house in Israel, so here are their recommendations for keeping your home in Israel clean and shining!

  • Economica – household bleach is the universal cleaning product in Israel. It is used generously to clean floors and surfaces, often with pleasant scents added to the bleach to mask its unpleasant smell. It is easy to forget how caustic it is – always wear gloves and beware splashes on clothing.
  • Magic Sponge is the secret product that we use to keep our white walls white! Almost any mark comes off with a damp magic sponge, and it is not impregnated with chemicals so it is easy and safe to use.
  • Calgon often provides the remedy for those annoying limescale deposits that appear wherever water sits. Because water in Israel is ‘hard’, it leaves behind white calcium deposits. Accumulated deposits can block pipes and inhibit the functioning of kettles, hot water heaters, shower heads and washing machines, so look for appropriate Calgon descaling products for your appliances too.
  • Sponga Stick – it’s not a product, but it is the “weapon” of choice for most Israeli cleaners in the war on dirty floors. Simple but effective – simply wrap a damp cloth (shmatter in Hebrew!) around the rubber floor stick and wipe your floors quickly and easily. Sponga is the Israeli way to clean!
  • Window Cleaning Spray – this is a no-brainer for keeping windows clean so that you can see the sunshine and enjoy those bright blue skies. However, pick your season – there is no point cleaning your windows in the winter or the spring until the last rains are over, because rain in Israel often carries dust or sand, and you’ll just have to clean them all over again!
  • St. Moritz Oven Cleaner – if you need to clean your oven after a spill or to prepare for Pesach, this is the strongest cleaning product we know! It attacks baked-on greasy spills, but it is also highly toxic – open the windows to ventilate the kitchen, wear gloves and old clothes to use this product, and always keep it far away from children.
  • Vinegar – some people swear by natural cleaning products like vinegar and baking soda because they don’t like using dangerous chemicals. Vinegar can often help to remove light limescale marks and to clean windows, so you can save your chemical weapons for the heavier cleaning tasks.

If cleaning house in Israel sounds like hard work that you don’t have time for, the Creative Estates Israel cleaning and maintenance team would be happy to take care of your Israel rental property. Talk to Shaun Isaacson about our property management services today.

Aliyah and Israeli Property Prices

One of the factors in the steady upward trend in property prices over the past 10 years is the steady increase in immigration to Israel. Shaun Isaacson discusses how Aliyah affects the Israeli real estate market and what he advises investors who are planning to make Aliyah in the future.

Demand for property in Israel is driven both by increasing immigration from countries where Jews feel uncomfortable (like France, the Ukraine, Turkey and Venezuela), and also by planned Aliyah by people of all ages from English-speaking countries, for whom Aliyah is generally an ideological or lifestyle choice. Immigrants of different nationalities choose to settle in different cities around Israel – some are motivated more by price and some by the communities where they will feel most at home. This means that real estate prices in cities such as Herzliya, Ra’anana and Jerusalem are much less elastic than other places, because of the consistently high demand from Anglo Olim.

According to statistics from the Ministry of Immigrant Absorption, between 2001-2016   34,000 Olim settled in Jerusalem and 27,000 immigrants moved to Tel Aviv. During the past 15 years, almost 10,000 Olim from France and 10,000 Russian Olim chose to live in Netanya, while 21,000 immigrants moved to Haifa.

Aliyah and Israel Property PricesWhile Anglos tend to choose the communities where they have friends, many other immigrant populations tend to move en masse to more adventurous and cheaper places. Thousands of French Olim have moved all the way to Eilat and over 1,000 recent arrivals from Argentina moved to Beersheva. Ashdod, Ashkelon, Bat Yam, Beit Shemesh, Kfar Saba, Modi’in, Petach Tikva and Rishon LeZion are also popular destinations with many nationalities – there is an entire neighbourhood of Petach Tikva known as Little Belgium! There is no doubt that the steady flow of immigrants has helped to keep the rental markets strong in these cities, and also has an impact on property sale prices.

Although the Go South! and Go North! campaigns run by Nefesh BNefesh are incentivizing immigrants to move beyond Israel’s overcrowded urban communities, it requires an additional degree of courage for someone making the big move to Israel to choose a rural destination. Generally Olim prefer to start out in familiar territory where they have an existing support network to help them adapt to the challenges of Aliyah, and that often means renting their first home in a community where they know people from back home.

Shaun Isaacson, CEO of Creative Estates Israel, often helps Olim to find rental properties in Israel and also manages properties for ‘potential Olim’. “We have tenants in some of our properties who have just immigrated to Israel. I generally recommend to people that they rent for a year or more rather than buying a property when they first make Aliyah, because it helps to check out the area before putting down roots.

“At the same time, many of my property owning clients have bought Israeli real estate as a buy-to-let investment with a view to making Aliyah and living there later. In the current climate, I usually encourage investors to buy the property that will give them the best rate of return, even if it is not in an area where they can envisage living. The rental income will continue to flow when they themselves move to Israel and decide where they want to set up home.

“Getting a foot on the Israeli property ladder before making Aliyah is usually a good financial decision. But investment decisions should not be confused with deciding where in Israel you would like to live, particularly if your Aliyah is a few years ahead. Who knows how the real estate map of Israel will have changed by the time you arrive!”

For more information about investing in property in Israel, as an investment and/or with a view to Aliyah, please contact shaun@ceisrael.com in complete confidence for a no-obligation consultation.

 

 

 

Renovating a Kitchen in Israel

If you are renting out a house or apartment in Israel, one of the most important features to potential tenants will be the kitchen. Shaun Isaacson of Creative Estates Israel explains how to add value to your Israeli property by renovating the kitchen.

As in many other cultures, the kitchen is often the center of a Jewish home. Family life and social life in Israel tends to focus around eating, so your tenants may expect a fully-equipped modern kitchen in their rental apartment. So here are some helpful points to consider before you start to renovate:

Kosher Kitchens

Not everybody in Israel is religious, but a 2016 poll revealed that even one-third of secular Israelis said they keep a kosher home. This usually involves keeping dairy and meat dishes in separate cupboards, washing them in separate sinks, and sometimes – at the more religious end of the spectrum – even having two separate ovens. You may have to consider the size of the kitchen and practicality of installing multiple sinks and appliances, but there is no doubt that advertising a kosher kitchen will add to the rental value of your property in most areas of Israel.

Israeli Plumbing

Depending on the age of the building in which your kitchen is located, you may encounter practical challenges when trying to upgrade the plumbing. Installing a second sink, for example, may involve adding additional water and waste pipes. It is not recommended to throw food waste down the sinks in Israel because the pipes are often narrow and can become blocked easily. Unblocking pipes will usually be the landlord’s responsibility, so you may want to install filters in the kitchen sinks that can be easily cleared. For the same reason, sinks with food disposal systems are not common in Israeli kitchens. You will save yourself money in the long term if you help your tenants to avoid kitchen sink disasters and pipe blockages.

Chilling in Israel

Refrigerators and freezers are an essential feature of any Israeli kitchen. Because of the hot weather during most of the year, some Israeli cooks will keep almost all their ingredients in the refrigerator. It is considered good practice to keep flour, rice, sugar, and many dried herbs and spices refrigerated to avoid possible infestation and to conserve their flavor. When planning your kitchen renovation in Israel, we recommend leaving large gaps for your tenants’ to install their refrigerator and freezer.  Some tenants may also want to install a cold water dispensing machine, which requires a thin pipe from the main cold water feed.

What is Shayesh?

When potential tenants walk into your new kitchen, they may ask about the ‘shayesh’. This is a catch-all Hebrew term that describes the kitchen surfaces that are usually made from stone. When renovating your Israeli kitchen you may want to choose natural granite or marble, but we recommend installing counter-tops made from caesarstone or other engineered stone materials. The advantage of these part-synthetic stone surfaces is that they are heat-treated and less likely to crack or show scratches. They are cheaper to install and maintain and will keep your kitchen looking good!

Creative Kitchens in Israel

Creative Estates Israel has renovated numerous kitchens in our clients’ rental properties. We have a team of contractors who have extensive experience in the various tasks involved in removing the old kitchen and installing a new one. We recommend that our clients talk to us before bringing in an expensive kitchen company, because we can always beat their prices and install a great-looking kitchen for less. Talk to us today about your rental property and any renovations that you require.

A typical Israeli kitchen renovation – taking it back to  the basics!

kitchen renovation Israel

No Limit on Rents in Israel

The new Fair Rents Law does not restrict Israeli landlords from raising rents, as had been proposed.

After months of debate and years of controversy, the Fair Rents Law passed into law on July 17 2017. The new law regulates the relationship between landlords and tenants by fixing certain terms for residential leases and creating minimum standards to ensure that rental apartments are fit for habitation.

Although the original version of the law proposed in 2013 included a restriction on raising rents, the final version of the Fair Rents Law does not actually limit landlords’ rights to request an increase in residential rental rates. It also only applies to homes that are rented out for periods of between three months and 10 years, and not to vacation properties.

The main changes introduced by the Fair Rents Law can be summarized as follows:

  1. WHO PAYS WHAT

    Landlords must pay for property insurance, but renters are officially responsible for paying bills for utilities, municipal taxes (arnona) and day-to-day maintenance.

  2. DAMAGE & REPAIRS

    Renters must pay for any damage that they cause to the property through “unreasonable use”. Owners are responsible for repair of damage caused by “reasonable use,” and must do so within 30 days. Urgent repairs must be carried out within three days, and if they are not then renters can deduct the cost of the repairs from their rent. The landlord must pay for anything that increases the value of the property.

  3. GUARANTEES (DEPOSITS)

    Landlords may not demand a guarantee or deposit of more than three months’ rent, and this money can only be used if the renter does not pay rent or other payments on time, or if they cause damage to the property, or vacate the property late.

  4. EXTENDING CONTRACTS

    If the parties agree that the renter can continue living in the property after the contract date, either party can then end this extension arrangement with reasonable notice.

  5. REALTOR FEES

    Whoever hires a realtor to rent out or find a property must pay the real estate agent’s fee.

Shaun Isaacson, CEO of Creative Estates Israel, who is a qualified lawyer and licensed realtor involved in long-term rentals throughout Central Israel, welcomes the new legislation. “Landlords who already provide a good standard of accommodation, and whose properties are well-managed and maintained, are happy that this legislation has finally passed into law. The threat of rent restrictions was worrying for some Israeli property owners, but we are happy to see that the all-important relationship between landlord and tenant will be regulated without imposing unnecessary restrictions.”

It is estimated that 2 million people live in rented accommodation in Israel, and by regulating this market the government hopes to encourage long-term rentals as a comfortable and safe alternative to buying housing.

The “Tent Protests” in 2011 were in part protesting the lack of regulation at the bottom of the rental market, and the proposed regulations designed to create fair economic conditions for renters and reduce pressure in the housing market. The new legislation combines proposals from six private members bills submitted by Knesset members from various parties, and it is seen as a good compromise between the different interest groups represented.

For more information about Creative Estates rental property management service in Israel, contact Shaun Isaacson at shaun@ceisrael.com or on +972 526521096. We will give you a price quote in complete confidence and without obligation.

 

Buying to Rent in Israel

How does Israel’s buy to rent market compare with other real estate markets around the world? What profit can investors expect to make from buying and renting out apartments? 

As with many things in Israel, the real estate market is complex and hard to predict. Israeli property prices rose by 5.9% during 2016, while rental prices rose by just 1.4% over the same period – the lowest annual increase since 2008. The shortage of housing stock and the rise in mortgage interest rates is boosting demand for rental housing but not driving up rental prices, so yield rates for investors are not increasing in parallel with housing prices.

Potential property investors look for a number of different factors when assessing their likely return on investment – purchase price, anticipated increase in property value, rental returns and renting costs. They also look for economic stability and predictable regulations, both of which are difficult to find in this region of the world. For example, fluctuations in the value of the shekel, which has risen 12% against the dollar over the past 5 years, make it difficult for overseas investors to calculate their ROI.

Legislative uncertainty has made Israeli real estate investments more unpredictable in recent years. The purchase tax on housing for investment was increased in 2015, and there is legislation on the books to tax the owners of three or more properties (currently held up by Israel’s Supreme Court). There have been multiple attempts to regulate the rental market in Israel but none have resulted in legislation.

Various bills have been introduced in order to try to stabilize rental prices, by either prohibiting landlords from raising prices or incentivizing them not to do so. They have tried to specify what conditions a rental property must meet, what repairs landlords are liable to make, and the maximum value of the collateral that they can demand from tenants. However, these bills have not passed into law because the government does not see it as an urgent priority, leaving the market largely unregulated.

One of the consequences of this regulatory vacuum is that Israel offers the lowest landlord costs in the world. According to the Global Property Guide (www.globalpropertyguide.com), Israel has one of the lowest “round trip costs” for property investors of any country, ranking 102 out of the 123 countries that they have surveyed. They look at the total cost of buying and then re-selling a residential property of comparable value, including all the rental costs (except the sale price itself), and this figure is expressed as percentage of the property value. In Israel, this total transaction cost is 6.74% of the property value, compared with 8.03% in the UK, 10.65% in Hungary and 18.45% in France. This means that the price of buying and selling investment properties, in terms of registration costs, real estate agent and lawyers’ fees and sales and transfer taxes, is relatively low in Israel compared with most other countries.

The same Global Property Guide shows Israel as levying 7.75% tax on rental income, which ranks us 89th out of 130 countries measured. In Switzerland the tax is 48% but in the Bahamas and many other countries there is no such tax, so Israel sits somewhere in the middle of the table. (Their calculations assume that the property owner is a non-resident foreigner with no other local income.)

Indices like this are not totally reliable, because situations change and certain assumptions have been made in the collation of comparable figures. For example, the agents’ and lawyers’ costs paid by buyers and sellers vary widely, with buyers of more expensive properties often paying proportionately lower agents fees.

However, it is clear from the Global Property Guide and other international indices that Israeli properties do not give the best return on investment compared with other countries around the world. The Guide website shows the return on investment in Israel as 2.57%, less than the average yield for the United States at 2.75%, and close to the bottom of their international table as the 76th of the 80 countries for which gross rental yields are measured. Investors could probably make much higher profits by investing in Eastern Europe or Asia, and yet the property investment market in Israel remains strong.

At Creative Estates, we understand that return on investment is not the only driving force in the Israeli buy-to-let market. In our experience, people who buy properties to rent in Israel are usually looking not only for a good long-term return on their investment, but also to own properties that they and their family may live in one day. They recognise that Israel’s strong economy, rising birth rate and steady flow of immigrants are keeping property prices high. Politicians and economists may talk optimistically about increasing the supply of properties and taking the heat out of the market, but most investors recognize that real estate is holding its value.

At Creative Estates, we don’t believe that the Israeli property bubble is going to burst – it may deflate slightly as the supply of new housing increases, but we are seeing solid property prices and steady rental income. Jews from around the world continue to buy real estate in Israel as their security against increasing anti-Semitism and to fulfil their dream of retiring to the Holy Land. As long as the rental income remains high enough to offset the costs of their investment, they will be happy to buy to let the real estate that they hope will one day become their home.