Minister of Finance Yuval Steinitz and Minister of Housing and Construction Ariel Atias announced a new measure to cool home prices at a press conference in Tel Aviv today. They said that the objective is to lower home prices and make home more accessible for young couples.
The core decision is to raise the purchase tax on apartments for investment (i.e. a second or more home) by the Ministry of Finance. At the same time, the ministry has suspended for two years the betterment tax on the sale of apartments for investment. The cabinet will vote on the measures at next Sunday's meeting, or at the following Sunday's meeting, at the latest.
Betterment tax is essentially a capital gains tax on apartment sales.
Steinitz said, "The seller of a second apartment has to wait four years before he can sell it without the betterment tax. The Ministry of Finance's measure will now exempt investors from the betterment tax for two years on the sale of a second or third apartment."
Atias said, "The action you see here - granting incentives to people who amassed apartments for investment - aims to get investors to sell. 15,000 apartments could reach the market. The objective is to increase the supply of existing apartments, not new land. We aren’t strangling real demand; we're targeting those who already have a home and want to make a quick buck by buying an apartment for investment. Let them wait for two years. We're not hurting the poor here."
Israel Tax Authority director general Yehuda Nasradishi disclosed the actual numbers. He said that the current purchase tax on a first home is 3.5% for up to NIS 1 million, and 5% for more than NIS 1 million. The purchase tax on a second apartment is 3.5% from the first shekel, and 5% above NIS 3 million. For the next two years, the purchase tax on a second or more apartments will be 5% from the first shekel, 6% for NIS 1-3 million, and 7% above NIS 3 million.
The betterment tax, currently 20%, will be cancelled for the sale of two additional apartments during 2011-12.
Published by Globes [online], Israel business news - www.globes-online.com - on December 16, 2010
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