Proposed Purchase Tax Cuts Aim to Revive Israel's Housing Market
Israeli real estate figures propose cutting purchase tax for private investors to 0.5% for a decade-long rental commitment to revive the housing market and curb rents.
A new proposal aims to revitalize Israel's stagnant real estate market and curb rising rental costs by offering a dramatic reduction in purchase tax for real estate investors. Engineer Haim Nachman, owner of the Nachman Group, presented an initiative developed with accountant Doron Sagiv, suggesting a temporary two-year reduction of purchase tax for private investors.
Under the proposed framework, purchase tax for private investors would drop from the current 8% to just 0.5% in the first year, and rise to 1% in the second year, provided that the buyers commit to renting out the property for at least a decade. The commitment would be officially registered in the Land Registry (Tabu). Nachman argues that this model, which mirrors the benefits currently granted to residential REIT funds, would motivate investors to accelerate acquisitions while significantly expanding the long-term rental housing supply.
The proposal seeks to address the severe slowdown in the secondary housing market, where private sellers struggle to compete with developers offering financing incentives. According to Nachman, revitalizing the secondhand market would trigger a chain reaction of transactions, helping home-shifters move forward and enabling developers to clear unsold inventory. He emphasizes that increasing the supply of rental apartments would ultimately help stabilize or lower rental prices for students, soldiers, and young couples.
However, the initiative raises several economic questions, including potential competition between first-time homebuyers and subsidized investors, as well as the immediate loss of state tax revenues. While the initiators acknowledge that tax revenues might temporarily decline, they argue that the surge in transaction volume, combined with VAT revenues from new construction, could offset the losses and reactivate the broader economy.
