After a long night of debate and discussion, the “third apartment tax” promoted by Finance Minister Moshe Kachlon was approved early Friday by the Knesset Finance Committee for its second and third readings in the Knesset, after which it will become law.
The tax, which is part of the Arrangements Law that accompanies the state budget, will kick in on January 1st. Under the law, landlords will pay a 1 percent tax per month on the assessed value of each home or apartment they own, beginning with the third property, up to a limit of NIS 1,500 per month, a total of NIS 18,000 a year. As the average value of homes in most cities is more than NIS 1.5 million, it is expected that most of the Israelis eligible to pay the tax will pay the full amount. The rule is expected to affect 50,000 people, who own a total of 180,000 homes. The value of the home will be determined by a government-certified assessor, based on home value data supplied by the Central Bureau of Statistics for each geographical area.
The hope among proponents of the law is that it will dampen the enthusiasm among investors for real estate, where much of the excess cash in the economy has sloughed off to, in the wake of near-zero bank interest rates. MK Miki Zohar, the Likud MK in charge of organizing votes for the bill, said Friday morning that along with the law, other measures, such as a one-time exemption of a luxury tax for the sale of apartments beyond the two that Israelis can now own without paying the extra tax, “will encourage the sale of assets and depress the purchase of new ones. I am positive that this measure will flood the market with tens of thousands of apartments, thus leading to a fall in prices.”
Government efforts to dampen enthusiasm for real estate investments seems to be finally having an effect, according to data from the Central Bureau of Statistics. A total of 22,700 new homes were sold in the first nine months of 2016, the CBS said, 8.3 percent fewer than were sold in the same period in 2015. Even more, sales in September totaled 3,240, 11.6 percent lower than in September 2015.