Buyers of first home to get tax break

Treasury: Lifting ceiling for purchase-tax exemptions will help 8,000 young couples a year.

February 8, 2011 23:27
2 minute read.
Living room view of Tel Aviv and the Mediterranean

elegant apartment_521. (photo credit: Uriel Messa)


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The Finance Ministry will raise the threshold for purchase-tax exemptions for first-time home buyers in an effort to help young couples, Finance Minister Yuval Steinitz announced Tuesday.

“The move will ease conditions for thousands of middle-class young couples, whether they are located in the center of the country or the periphery,” he said. “The Treasury, the Knesset Finance Committee, the Bank of Israel, the Construction and Housing Ministry and the Israel Lands Authority...

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are taking steps to lower housing prices, to boost supply and to remove obstacles in an effort to make it easier for young couples to buy their first home.”

As part of the government’s efforts to reduce escalating housing prices, the Treasury and the Knesset Finance Committee agreed to raise the purchase- tax exemption from the current NIS 1,139,320 of the acquisition price to NIS 1,350,000 for buyers of a first home. The Treasury said the change would enable an additional 8,000 young couples a year to buy an apartment.

First-time home buyers will pay a 3.5 percent purchase tax on homes that cost more than NIS 1,350,000 for up to NIS 1,601,210 of the purchase price and 5% on any amount above that.

“The housing problem has become unbearable, and we need to tackle it from all sides,” Knesset Finance Committee chairman Moshe Gafni (United Torah Judaism) said Tuesday. “Among the tools for providing a solution to the problem are lowering taxes, releasing more land to the market and cutting bureaucratic processes regarding the sale of first apartments to young couples.”

Property prices have surged over the past three years as interest rates dropped to a record low and the government was slow to rectify the shortage of housing, making it harder for young couples and first-time home buyers to purchase an apartment.

House prices rose 17.3% last year, and since the fourth quarter of 2008, the average cost of a four-room apartment increased 29.4%, according to the Government Assessor Survey published Monday.

Association of Contractors and Builders deputy director-general Eran Nitzan said he welcomed Gafni’s efforts. The association has been trying for years to get the purchase tax canceled to reduce the tax burden on the real-estate market, he said.

“The tax break will help struggling first-time home buyers and people who want to improve their housing situation by purchasing a new home and selling their current apartment,” Nitzan said.

The tax break is one of several measures announced in recent months to boost the housing supply and lower prices.

The Finance Ministry in December decided to cancel the capital-gains tax on apartment sales for sellers of an investment apartment, meaning their second or third ones, for a period of two years.

In addition, it raised the purchase tax on investment apartments starting this January. For the next two years, the purchase tax will be 5% on apartments worth up to NIS 1m., compared with the current 3.5%; 6% on those that cost NIS 1m. to NIS 3m., compared with the current 5%; and 7% for those that cost more than NIS 3m.

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