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Real estate in Israel: purchase, rent, prices

The price-to-rent ratio is considered the most significant indicator in determining whether renting or buying is the best economic decision.

How to calculate the cost of real estate in Israel

To make a decision about choosing a house or apartment to buy or rent in Israel, it is sometimes not enough just to study housing prices and mortgage rates.

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According to experts, in order to understand whether it makes financial sense to Israel to buy real estate or lease on a long-term basis, it is necessary to consider rental rates for similar properties. So, Forbes magazine calls one of the useful tools such an important indicator as the rent ratio: the purchase price divided by the annual rent of a similar object.

This metric, which measures the value of real estate in Israel, mimics an inverted version of the metric used to estimate the dividend yield of stocks.

According to the Central Bureau of Statistics (CBS), in most communities in Israel, the ratio of price-to-rent rising from year to year is about 30. At the same time, according to analysts, the cost of Israeli rent is significantly lower than buying a comparable residential property.

The higher the coefficient, the more relevant it becomes to consider the issue of rent. Conversely, with a low rental ratio, it may be worth considering buying a property, at least from a purely financial point of view. When assessing a mortgage payment, you need to use information about rates, amounts and ratings of loans for a specific area, and not the average figures for the country. It is also worth considering the costs of taxes, insurance, and statutory municipality fees for homeowners. So, for example, when buying an apartment or house in Israel, everyone is obliged to pay land acquisition tax (mas rechisha), based on the value of the property, as well as on the personal status of the buyer.

Israel real estate purchase and rental lifestyle

Buying real estate in Israel means a complex legal and financial transaction, therefore, when signing a purchase agreement, you will need to consult a real estate lawyer to assess the possible consequences of the agreement. For their services, such specialists often charge a certain percentage of the value of the property.

In particular, if we talk about concluding an agreement on the purchase of an object under construction, the term for its completion is often two to three years. In case the contractor goes bankrupt or fails to complete the project, there is Israeli investment protection law for the buyer. The associated multiple regulatory mechanisms for consumer protection provide a well-regulated basis for the buying process. Familiarity with some of the basic legal remedies is a very important factor for anyone buying real estate in Israel.

Find financial stability before buying property in Israel, possibly by renting. Problems in this area can often be mitigated by choosing a rental-friendly lifestyle.

The so-called rental lifestyle can also mean living in conditions that are not yet available upon purchase. Some people buy real estate in Israel, rent a house or an apartment, renting out, in turn, partly in sublease. This generates a healthy stream of passive income, which in turn can be flexibly used to pay rent, other expenses, or reinvestment.