The deficit in the state budget has caused ministries to set upon the real estate market, with an emphasis on luxury homes and foreign residents. Sources believe that the string of changes in real estate taxes, including the hike in the purchase tax rate on homes costing more than NIS 15 million to 10%, and the cancellation of the capital gains tax exemption on the sale of one apartment every four years, will result in greater efforts to sell high-end homes before the amendments come into effect in January 2014. Everyone agrees that afterwards, the purchase and sale of high-end homes will become rare, and the luxury market will stagnate.
Neot Shiran owner Noam Dzialdow says that owners of luxury homes are taking into account that, from the end of this year, the capital gains tax exemption on luxury homes will be cancelled, and that there will be a sharp rise in the taxes that they will have to pay. Therefore, even homeowners who do not have to sell are considering this openly now, in order to save on taxes.
"The differences from the loss of the capital gains tax could result in the loss of millions of shekels to millions of dollars," says Dzialdow. "This point creates strong movement in very high-quality assets, which are being sold and which will be sold by the end of the year."
In contrast, assessor Erez Cohen believes that even if high-end properties are put up for sale now, there is no assurance that a buyer will be found for them. "The luxury market has been stagnant for a long time, and the decision to sharply raise the purchase tax on homes costing more than NIS 15 million to 10% of the purchase price, will result in a total freeze in luxury home sales from 2014. This is a tax that is calculated for VAT. It can be said that the VAT in Israel on luxury homes has risen to 28%, which exists nowhere else in the world," he said.
"If we saw the purchase of one luxury home per month or quarter, they will become rarer, and we will see just one purchase every six months or more. They're simply killing market, which is a pity. We're not only talking about foreign money entering the country, but there is also the Zionist motive. The buyers of these homes aren’t suckers, and just as they can buy a home in Israel, they can a home somewhere else. Developers will be the first to see this, and if there is a freeze, they will simply not build any more of these buildings."
NIS 40 million for a 370-square meter apartment at the corner of Shaul Hamelekh Street and Ibn Gvirol Street in Tel Aviv that Ofer Glazer sold to oligarch Mikhail Fridman.
In September 2012, businessman Ofer Glazer sold an apartment on the 28th floor of the Hashoftim Tower built by Gindi Holdings at the corner of Shaul Hamelekh Street and Ibn Gvirol Street in Tel Aviv, for NIS 39.8 million. The 370-square meter four-room apartment has five underground parking spaces. The apartment is located one floor below the triplex owned by Glazer's ex-wife, Shari Arison. Glazer reportedly bought the apartment on paper from Gindi for NIS 20 million, and by selling the property before the cancellation of the capital gains tax comes into effect, he has made a NIS 20 million tax-free gain.
Glazer reportedly sold the apartment to oligarch Mikhail Fridman, an associate of Russian President Vladimir Putin, and the owner of conglomerate Alfa Group. In January 2013, he was ranked sixth in the list of Russian's wealthiest oligarch's by "Forbes", with an estimated fortune of $13.4 billion.
Glazer has expressed support for increasing taxes on high-end homes. "I do not own properties in order to own properties, but to sell them. Since I decided not to live in the apartment for family reasons, I might have sold it even if I had to pay the capital gains tax. It's just to make life a little harder for Israel's rich. Nothing will happen to those who have, and have a lot, if they take a bit from them. For those who have a little, if it's taken away, they'll be left with nothing. That does not mean that it is right to jump on Israel's rich, but there should be a degree of social justice here," he said.
NIS 81 million for a 612-square meter apartment at 51 Hayarkon Street in Tel Aviv
The biggest real estate deal so far in 2013 was signed in June. A ten-room apartment in the David Promenade Residences project that Henry Taic is building across the street from the Tel Aviv's boardwalk was sold for NIS 81.46 million. The 612-square meter apartment on the building's 17th floor has four parking spaces. The deal was made at a price of NIS 133,000 per square meter. The project comprises two 26-storey high-rises, one a hotel and the other residential, at 51 Hayarkon Street, just north of the Opera Tower, between Hayarkon Street and Herbert Samuel Street. Neot Shiran is the real estate agent for the project.
NIS 55 million for a 1,000-square meter house on a 5,000-square meter lot at 61A Hasadot Street in Kfar Shmaryahu that David Federman sold to Haim Amir
In April, David Federman, a controlling shareholder in Israel Petrochemical Enterprises Ltd. (TASE:PTCH) and the owner of the Maccabi Electra Tel Aviv Basketball Club, sold his house in Kfar Shmaryahu to high-tech businessman Dr. Haim Amir for NIS 55.1 million. The Federman family built the 1,000-square meter house on a 5,000-square meter lot at 61A Hasadot Street in the 1990s. The property includes a swimming pool, tennis court, basketball court, and fitness room. Federman's associates said that the family sold the big house after their children left the nest. Three years earlier, Amir made another big real estate deal, when he bought two floors in the Ackerstein Tower in Herzliya Pituah from Industrial Buildings Corp. (TASE: IBLD) for NIS 30 million. Tel Aviv real estate agency To Go brokered the sale.
NIS 47 million for a 400-square meter apartment with a 60-square meter balcony at 10 Herbert Samuel Street in Tel Aviv that Leora Ofer sold to Gabriel Tamman
Businesswoman Leora Ofer recently sold her 400-square meter apartment with a 60-square meter balcony on the 19th floor of the 20-storey Herbert Samuel project in Tel Aviv to businessman Gabriel Tamman for NIS 47 million. Ofer Investments Ltd. is building the seafront project at 10 Herbert Samuel Street. Sources involved in the sale say that it was closed a few days ago. The property was sold in shell condition and the buyer will have to invest substantial sums in interior design. The sale was made at NIS 102,000 per square meter.
NIS 72 million for a 1,000-square meter house on a 1,500-square meter lot at 101 Kaplan Street in Herzliya Pituah that a Belgian resident sold to Ruth Parasol
In late 2012, when the high-end residential market was in the doldrums, American-Israeli businesswoman Ruth Parasol unexpectedly signed the contract for a house at 101 Kaplan Street in Herzliya Pituah that she bought in October for NIS 71.68 million. This was the biggest real estate deal for the year. The 1,000-square meter ten-room house with a basement and a swimming pool was built on a 1,500-square meter lot in 2004. The property was put up for sale by a Belgian businessman. Parasol, 45, was born and raised in the US. She founded PartyGaming plc, which held its IPO on the London Stock Exchange in 2005 at a value of NIS 9 billion. PartyGaming merged with Bwin in 2011 to form Bwin.Party Digital Entertainment plc (LSE: BPTY), in which she is a shareholder.
NIS 44 million for an 800-square meter apartment at the corner of Allenby Street and Rothschild Boulevard in Tel Aviv that Berggruen Residential sold to Moti Maximoff
One of the last deals made which makes the top-ten list of real estate deals of the past 12 months was in the Meier on Rothschild Tower. Canadian businessman Moti Maximoff bought an 800-square meter apartment with four 12-square meter balconies in the upper part of the 42-storey building. The sale was made at NIS 55,000 per square meter.
The Meier on Rothschild Tower, which will have 141 apartments, is being built by Berggruen Residential Ltd. (TASE:BRGN.B1), controlled by US billionaire Nicolas Berggruen and Hagag Group Real Estate Development Ltd. (TASE: HGG). Buyers of apartments include Mellanox Technologies Ltd. (Nasdaq:MLNX; TASE:MLNX) founder and CEO Eyal Waldman, Allalouf & Co. Shipping Ltd. owner Jackie Allalouf, Super Pharm Israel Ltd. CEO Lior Reitblatt, and Nat Rothschild, a great-grandson of Baron Rothschild, who bought a 500-square meter apartment for NIS 60 million. The developers are asking NIS 170 million for a triplex in the building, but have not yet found a buyer.
NIS 27.2 million for a 488-square meter apartment at 2 King David Street in Jerusalem
In May 2013, a 488-square meter nine-room duplex on the fifth floor of the Waldorf Astoria project, which is under construction in Jerusalem, was sold for NIS 27.2 million.
NIS 34 million for a 274-square meter apartment at 2 Roeh Tzon Street in Jerusalem
In September 2012, a 274-square meter six-room second-floor apartment in David's Village at 2 Roeh Tzon Street, off Mamilla Street, was sold for NIS 34 million.
NIS 26 million for a 600-square meter house at 10 Alharizi Street in Jerusalem
In January 2013, the house in which the late Supreme Court Judge Moshe Landau lived at 10 Alharizi Street in Jerusalem's Rehavia neighborhood was sold for NIS 26 million. The 600-square meter stone house on an 800-square meter lot was bought by a foreign resident as a residence.
NIS 36 million for a 700-square meter house on a 1,000-square meter lot at 17 Ben Eliezer Street in Herzliya Pituah that a Belgian businessman sold to Nicol Raidman
In November 2012, a 700-square meter three-floor seven-room house on a 1,000-square meter lot at 17 Ben Eliezer Street in Herzliya Pituah was bought for NIS 36 million. The property is registered in the name of Adv. Yoav Segal of the Dr. J. Weinroth & Co. Law Office, but market sources say that the person behind the purchase is Nicol Raidman, the partner of oligarch Mikhail Chernoy. The house, which is fairly new, was bought at the same time as the adjacent lot with an old house slated for demolition, which was bought for NIS 16.5 million. It is possible that the same buyer is behind both deals.
Real estate tax changes in the 2013-14 Economic Arrangements bill
From August 1, 2013, foreign residents will not be eligible for the purchase tax rate on a single home. From January 1, 2014, foreign residents will not be eligible for the capital gains tax exemption on the sale of a home, even if it is their only home in Israel, and will pay the 25% tax rate. However, if a foreign resident provides a permit from the tax authorities in his home country that he does not own a home there, he will be eligible for the tax exemption.
For all residents, from August 1, 2013, the purchase tax on homes costing NIS 4.5-15 million was raised to 8%, and a new tax bracket of 10% was added on homes costing more than 15 million.
If you want to be a neighbor of Shari Arison, former Bank Leumi chairman Eitan Raff, Adv. Yehuda and Tami Raveh, IDF Maj.-Gen. (res.) Amos Malka, former defense minister Ehud Barak, and businessman Muly Litvak, a penthouse is still available in the Hashoftim Tower. The developer, Gindi Holdings is asking NIS 49 million for the 500-square meter penthouse with 75 square meters of balconies on the building's 26th floor. Its advantage is that the building is completed and there is no need to wait for construction to end, as was the case for the first buyers in the project in 2006.
Published by Globes [online], Israel business news - www.globes-online.com - on July 25, 2013
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