The latest government measures to rein in the housing market will put 15,000 new apartments on the market, Cabinet ministers say.
The Cabinet will be asked to approve, in its next meeting or the one after that, additional new measures to stem the rising housing prices. Specifically, the purchase tax on luxury apartments is to rise, and investors will be given two years of tax-free sale time to sell what they own.
Finance Minister Yuval Steinitz and Housing Minister Ariel Attias announced the new measures at a press conference this morning. They said the goal is to bring about lower apartment prices and make apartments more affordable for young couples.
The purchase tax on apartments is currently 3.5%, and 5% for apartments costing more than one million shekels ($280,000). One who buys an additional apartment must pay 5% only if it costs more than 3 million shekels. The new rates, which affect only those who are purchasing a second apartment or more, will be: 5% up to a million shekels, 6% for those costing between 1 and 3 million, and 7% for those that cost more than that.
Capital gain taxes, of 20%, are exacted only on second apartments sold within four years of purchase. The new regulations stipulate, however, that anyone may sell such an apartment for the next two years without paying such taxes.
Attias explained that the purpose is to get investors to sell their apartments and thus increase the supply.
The latest measures join previous reforms over the past few weeks in an attempt to stem rising housing prices throughout Israel. In mid-November, for instance, the government announced a reduction in capital gains taxes on lands for a limited time.
Prices have risen continuously for the past 22 month; the last decrease was in December 2008, when they dropped by only 0.3%. The most recent stats show a slight slowdown in the increase, with prices climbing only by 0.4% in October. They have risen 18.2% over the past year, and by more than 50% since May 2007.
Steinitz said that the housing crunch stems mainly from the fact that “over the past five years, construction has been taking place at a very low rate – and also because of our great blessing in having emerged quickly from the economic crisis.”
In Hong Kong, purchase taxes were recently increased dramatically, but Steinitz explained, "We did not take such a drastic step, because our approach is more comprehensive than was taken in Hong Kong.”