Owning a home in Israel has never been easier or more attractive, particularly if you buy Israeli real estate off-plan.

During the past 6 months, it is probably fair to say that most Jews around the world have at least thought about moving to Israel! Whether during the early months of the Covid-19 pandemic, when Israel outperformed every other country in reducing the rate of infection, or when the ugly riots and the divisive election campaign across the United States threatened to turn anti-Semitic, or when Islamic terrorists reappeared on the streets of France and Austria.

Whether Aliyah is in your long-term or short-term plans, investing in the construction of your own home in Israel makes sense economically. No other investment guarantees you a 20% return over three years! With interest rates below 1% in most countries, it makes sense to invest your savings in an inflation-proof, profitable and practical real estate project in Israel.

Buying Israeli Real Estate Off-Plan

Buying properties off-plan is how generations of Israelis have managed to afford their own homes.  This means buying an apartment from a contractor before the building is built, and choosing how you want it laid out and decorated. The financial structuring makes it easy for families who are not wealthy to put down 50% at the start of the process, and borrow the remaining cost of the property only when the final payment is due. Building apartments generally takes between two and four years, and many purchasing contracts are structured such that you only need to pay the balance of the purchase price when the building is almost complete.  

Savvy investors will buy two apartments off-plan in the same building and quickly sell the first one when it is completed to fund the purchase of the second. Since off-plan projects typically appreciate by 20% between purchase and completion, you can recover the full cost of one apartment and use it to pay for the second.  Another option is to take out a mortgage for the 50% payment and pay for it with rental income from letting out the apartment, either to long-term tenants or for short-term holiday rentals. There are many projects throughout Israel that offer different incentives, such as paying 20% on signing and 80% on completion. 

Off-Plan Investing By the Numbers

The Israel Property Network has a number of very attractive off-plan properties that are being snapped up by overseas buyers. For example, a four-room apartment  in Ra’anana can be purchased today for 1,975,000 NIS (approximately $575,000) which means putting down a deposit of $275,000 now and paying approximately $300,000 (at the prevailing exchange rate) when it is completed in 2022. By then, the apartment should be worth around 2,370,000 NIS, based on current price trends, and you could sell it for a profit of 395,000 NIS, representing a 20% profit on your original investment. Alternatively, you could rent it out to cover the cost of your mortgage. If you took a mortgage for 1,000,000 NIS, the payments would be approximately 4,700 per month, and this apartment should be rentable at 6,500 to 7,000 NIS per month.

Another of the advantages of buying an Israeli apartment off-plan is that you can specify how the rooms are laid out and choose your kitchen, bathroom fittings, tiles and other decorations to suit your taste. If you are unable to come to Israel to sit with the contractor and make these decisions, we can set you up with an experienced interior designer, who will take care of all the details and ensure that the project remains within your budget. 

Why Choose the Israel Property Network

At Israel Property Network, we have a team of lawyers and financial experts, property managers and interior designers, who can help you take care of every aspect of buying an Israeli apartment off-plan and online. We can help you with the financial structuring to suit your budget and your future plans, and our lawyers take care of the due diligence to check that the contractor has all the right paperwork for the project.

We recognize that you may not be able to speak with an Israeli bank at this time, but we can connect you with an experienced mortgage broker. Our national network of local real estate experts can recommend the most appropriate projects for your budget, since they know which are the up and coming areas where apartments will increase in value and be easiest to rent.. 

We have been working with families from all over the world who recognize the benefits of pooling their resources to buy a family property in Israel. Even if you have only a few thousand dollars or pounds sitting in a bank account, shrinking every month as inflation exceeds interest rates, then now is the time to pull together enough for a down-payment on an off-plan apartment in Israel. Within 3 years you could be sitting in your own property in Israel, and watching its value appreciate!

I was flattered because Sabrina and her colleagues recognize the expertise that Creative Estates Israel has developed in the complex field of property management in Israel, which includes not only the management of long-term rental (investment) properties, but also home maintenance and management services for overseas owners who own a property in Israel and choose not to rent it out.

I am excited because teaming up with the Israel Property Network expands our horizons even further throughout Israel. IPN has 14 regional hubs around the country, including 4 walk-in realtor offices, and employs 20 real estate professionals who really know their stuff. Creative Estates can now benefit from their local expertise, and consult with them on behalf of our clients who are considering investing in Israeli real estate.

Sabrina Ziff has nearly three decades of real estate experience in the UK, Europe and Israel. She has built her network of licensed realtors and support staff to provide professional help to English-speaking clients with real estate purchase and sales, short term and long term rentals, new-build real estate projects, and land purchase for residential and commercial purposes. Their understanding of the Israeli real estate market is second to none, and they share our commitment to high quality personal service. The Israel Property Network is respected throughout the Jewish world, with particularly strong connections in the United States, the UK and South Africa.

That is why being chosen by IPN as their partner of choice for property management is a huge compliment. Sabrina and I expect that many more people will be looking to move to Israel in the coming months and years, and this collaboration allows each of us to focus on our core business, knowing that we can rely on each other’s expertise to give the best possible service to both domestic and overseas property owners and new Olim.

Living in the shadow of the coronavirus is difficult for everyone, with the uncertainty and economic challenges that we are all experiencing. Forging a new partnership at this time is a way of focusing our commitment to help people in the best way that we can. At Creative Estates Israel, that means protecting our clients’ assets while they cannot visit Israel, and ensuring that those who rent out their properties continue to receive the best possible return on their Israel investment property.

Stay safe everyone!

COVID19 (Well, at least the first wave…) has had quite the impact in the traditionally cautious Israeli banks. With the easing of Bank of Israel lending requirements, as part of the central strategy of COVID recovery plan, and historically low interest rates, some of the Israeli banks are now able and willing to offer certain finance solutions that until not long ago seemed virtually impossible. 

Here are some of the most significant changes we’ve seen recently:

Purchase tax is reduced, and can now be financed. Commercial mortgages allow for interest only payments , “Cash out” refinances have  become a viable liquidity solution , and market interest rates are at historic lows!!!

• Purchase Tax –  To be reduced from 8% to 5% for purchasers who are neither Israeli residents, or residents who already own a residential property in Israel. This dramatic step cuts the total closing costs for an investor by ~40%!
  Plus, now you can finance it too!

• Cash-Out Refinances – Used to be up to 50% loan-to-value. Currently, until Sep 2020, can go as high as 70%., regardless of citizenship or residency 
• Commercial loans –  When either the property is commercial, or the owner of record is an entity, some banks will now offer a 5-7 year interest only term, on a 20-25 year amortisation schedule, with no prepayment penalty. 
• Interest Rates –  Rates are now at historic lows: Adjustable US Dollar linked loans @ ~2.1%-2.5%, or effective rates in Shekels @ ~2.65%-3% on a 15-30 year terms . 

*Most of the programs are temporary in their nature, some set to expire in 9/2020.  

*Each program has specific terms and conditions that must be met for eligibility.

In light of the current state of affairs it comes as some relief that the Bank of Israel is addressing the situation and are working towards helping the those consumers looking for financing. BOI recently introduced two underwriting guideline as part of their continued efforts to re-ignite the lending market and the banking sector.

The first update is an attempt to reduce the interest rates, which spiked by ~0.75% immediately when the pandemic hit. The update calls for a significant reduction in the reserves that each bank is required to set aside when funding a mortgage. The hope is that by reducing the reserves required, the extension of credit will cost the lender less, which will allow them to lower interest rate for the borrower. Whether or not that result is actually achieved remains to be seen.

The second update is geared to alleviate a widespread issue for the ~1 million Israelis who were placed on furlough, or had their income level significantly reduced when the pandemic hit. The banks are now allowed to approve their mortgage loan application based on the pre-Corona income levels as long as the bank confirms that they expect the borrower’s income level to revert to its previous level once the pandemic subsides, and that the debt to income ( DTI) ratio is no higher than 70% of the post-corona income.

It is important to note that the guidelines only spell out what the banks are ALLOWED to do. The decision on what to lend, at what rates and based off what DTI calculations is determined only by the specific lenders themselves. Recent history has shown that the banks are extremely cautious with their lending decisions, and its far from a guarantee that these updates will lead to the result for which they were created. Namely, to allow individuals access to credit at affordable terms and with a reasonable qualifying process. Only time will tell…

People have been asking me about the state of Israel’s real estate market and how we have been affected by the COVID-19 pandemic.

It is clearly too early to tell what the longer term impact will be on Israel’s economy, on the demand for housing for the projected wave of immigration, or on the housing market. Our government is only a few weeks old, and the new housing minister – Yaakov Litzman from the United Torah Judaism party – has yet to announce his intentions. It could be said that, during the past year, the absence of a government has actually left the Israeli real estate market to flourish without interference!

Like all businesses around the world, we have had to adapt our business practices to cope with the restrictions of social distancing and hygiene. We have been wearing face coverings and gloves when visiting clients’ properties and meeting with tenants. During the lock-down, we were categorized as one of the necessary services that people could call on if they had problems with property maintenance. We did deal with several emergency call-outs in Ra’anana, Herzliya, Haifa and Netanya, to mention just a few. We have also been checking empty properties for landlords who are stranded overseas and cannot visit Israel at the moment.

We have extended our offer of free property checks to overseas property owners who are not clients of Creative Estates Israel, and will continue to do so for as long as people are reluctant to travel.

We manage a number of homes that are usually occupied during the peak Pesach season and during the summer vacation. Many visitors from outside Israel have sadly had to cancel their visits during 2020. In Tel Aviv and Jerusalem, where there are an estimated 30,000 short-term rental properties, 2,000 properties were taken off the tourist market (through AirBnB and similar platforms) and advertised for rent on the local market, which caused a temporary dip in short-term rental prices.

The Bank of Israel reported a fall of 15% in rents during the lock-down period, but this did not affect the overall upward trend. Between March 2019 and March 2020, rental prices in Israel rose by an average of 2.3%, and by the end of April activity in the rental market returned to pre-lock-down levels. In the metropolitan area of Tel Aviv average rents have risen between 8 – 10% over the past three years.

Real estate market experts point out that past government policies to discourage property investment may have contributed to an upward pressure on rents. This is because 27% of Israeli households live in rented homes, and the proportion of apartments bought by investors for rental has fallen from 30% to 13% of purchases. This has contributed to a shortage in the supply of long-term rental properties, while plans to expand the housing stock and encourage renters to buy their own homes have been slow and ineffective.

During this difficult economic period, we fully expected to receive requests from tenants in the properties we manage to accept delayed rental payments. However, I am happy to report that only one of our tenants asked to pay late, and they were actually able to pay their rent in full, so none of our landlords were affected by rent delays. It probably helps that we are careful in selecting tenants for our properties and prefer to set up direct payments with them.

We understand that in other countries the situation has been difficult for landlords, where non-payment of rent has jeopardized the security of their investments and their ability to cover mortgage payments, but in Israel the rental market has remained robust. With talk of a wave of 50,000 new immigrants forecast for the coming year, we are optimistic that Israel remains a prime market for real estate buy-to-let investment.

We look forward to welcoming our overseas landlords back to Israel very soon, and we wish our friends and clients in Israel and around the world a healthy summer. Stay safe!!

The biggest issue here is the time needed to deal with phone calls and filtering out the noise. Endless phone calls, most of them from agents can be very time consuming.

Obviously, the homeowner wants to sell so will agree to multiple agents working on the sale.  This often leads to an incorrect flow of information.  Different listing prices, inaccurate information about the property are two of the major issues with multiple agents listing.

If multiple agents are involved there is also less co-operation between the agents as they are all competing for the sale.

Finally, should a potential client contact the owner and after visiting leaves, most often the homeowner will not stay in contact with that buyer.  Should, for example, there be a price reduction the homeowner would most likely not contact the buyer and update him, which might have been the main reason why the buyer walked away from the property in the first place.  The lack of follow-up could reduce the number of possible buyers drastically.

Exclusivity, taking the leap of faith.

Explaining the concept of exclusivity in real estate terms is quite simple.  It means finding an agent you trust with the process of marketing your property and managing the flow of clients, both private buyers, and agents, to get the best possible offer on the property.

The exclusive agent is responsible mainly for marketing, not only selling, the property.  Marketing means advertising across all the different media; social media, printed media and direct contact with other agencies. If done correctly there will be many clients contacting the agent for information.

Filtering out the noise from these clients is the responsibly of the agent.  Providing as much information as possible in advance and asking important questions could eliminate wasted time of clients who visit the property and the property is not what they were expecting, or clients who love the property but have not secured a mortgage and can’t move forward with the purchase. Buyers may work with many agents and this filtering could avoid the same client arriving with different agents. Basically, the homeowner is relieved of all the noise generated by the marketing and only sees the relevant clients in his home.

Finally, as the marketing process moves along the exclusive agent can keep all relevant parties updated with changes to the listing and could keep potential buyers interested throughout the process.  Should an offer be made the exclusive agent has the knowledge and experience in negotiating on the homeowner’s behalf which can get a better price for the homeowner.

An exclusivity is a tool, which if used correctly, can benefit the homeowner tremendously.  All the homeowner needs to do is choose an agent that they trust and then let the process run.

Finally, exclusivity is not a marriage.  After the specified period, the homeowner can then re-evaluate and choose a different direction if need be.

A rise in Israeli property tax is about to happen to both short term stay and holiday rentals. This is a massive concern to all who own property in Israel and are looking to maximize their profits. The Israeli real estate market is known to be filled with huge opportunities for investment in holiday homes. It is a well-known fact that hotels and motels can be a bit on the pricey side, especially when located in central locations and even more so during peak times of the year. Naturally, when these popular vacation times come around, there are people looking for top quality places to stay, just without breaking the bank.

Israel Property Network prides themselves on providing an elite service whereby both the owners and renters feel that their best interests are being fully taken care of.

Airbnb has over 8,000 rooms and apartments available in Tel Aviv alone, which matches the amount of hotel and hostel rooms available, and yet, the 40% increase in tourism that burst previous records for Israel, pushes a high demand in property availability. The impact on Tel Aviv from the upcoming Eurovision contest will only squeeze the market even more for the incoming horde of tourists. The time is right for you to maximise your rental income for your property in Israel.

All this considered, the government of Israel is starting to observe this activity closer with a more watchful eye as it moves to raise property taxes on Airbnb apartments. This won’t take effect though, until after the Eurovision contest. Therefore, now is the best time to understand the new property tax plans and invest strategically in Israel to obtain the best opportunities that the White City offers while it still exists.