In recent years, thousands of Israelis jumped at an opportunity that seemed like a dream deal: the 20/80 financing model. Buyers pay 20% at signing and only 80% upon delivery. This approach allowed buyers to hold two apartments at the same time – the old one for rent or waiting, and the new one for future use. The assumption was simple: while the new apartment was being built, the old one would increase in value and be sold at a good profit.
Unfortunately for them, the market went in a completely different direction. Second-hand prices stagnated, transactions slowed down, and the hope for a quick profit turned into a burden. According to real estate tax regulations, anyone holding two apartments for more than a year and a half or two years (depending on the purchase date) is defined as an investor and subject to purchase tax at a graduated rate of 8% to 10%, depending on the deal’s value. When the tax can reach hundreds of thousands of shekels, the pressure to sell becomes very tangible.
This reality is leading more and more homeowners to make significant concessions. Instead of insisting on the original price, many cut tens of thousands of shekels or more just to close a deal before the tax hits them. For some, this is not just a reduction in profit – it is an actual loss compared to what they had planned.
So where is the pressure the highest?
The report published by the Finance Ministry points out that the phenomenon is particularly noticeable in high-demand areas. In the center, in Tel Aviv, and in the Sharon region, the stock of stuck apartments is enough for more than six months of transactions.
In Netanya and Rehovot, the average sale time is around five to six months. In Haifa, the figure is four to five months, and in Hadera less than four months. In Beersheba, on the other hand, it is four months of forward transactions – a relatively high figure for the southern periphery.
In smaller cities, the phenomenon is less dramatic. In Tiberias and Nazareth, for example, it is only a few hundred apartments waiting to be sold – 500 to 1,000 properties at most. There, the market is more flexible, and the pressure is much lower.
The Clock is Ticking
The Chief Economist’s Division notes that a decade ago, there was an attempt to shorten the period during which two apartments could be held without tax – from 24 months to only 18 months. However, the measure was temporary, and today it is again two years. For many families, even this is not enough. A slow market, high interest rates, and limited demand make selling on time nearly impossible.
Thus, the 20/80 deal, which was supposed to be a convenient economic engine, has become a trap putting sellers in a difficult dilemma: cut the price sharply and sell quickly, or get stuck with a tax that erases the entire profit. For many of them, this is not a theoretical question but a decision that will determine their financial future in the coming years.