There are several advantages and disadvantages with buying a new apartment in Israel. There are also significant differences between buying new and existing property that go way beyond the level of finish you may receive. Accordingly, it is important to be advised by a professional consultant that can help you weigh all the pros and cons.
Firstly, keep in mind that builder’s representatives are just that and, as salesmen for the builder, they are working toward a monthly target. However nice or polished they appear to be, always remember that they are acting first and foremost in their employer’s interests rather than yours. Accordingly, they could be trying to persuade you to buy a flawed, less desirable apartment with an unrepeatable discount limited to a certain number of hours or days. Under these circumstances, it may be worth hiring an independent professional who knows how to ask the right questions to verify what is being told and can give you an objective opinion.
A recent case in point was when an unadvised client was expecting to get a panoramic open view from his bedroom. After signing a contract to purchase an apartment with an amazing view, it became apparent that when the building behind would be built, all he would be able to see would be the new neighbor’s shower! Luckily, we saved the day and got the apartment switched for him. New build apartments often take 2-3 years to complete, which if you are converting to shekels with funds from overseas also means exposure to volatility in foreign exchange rates. It is also worth noting that outstanding balances are usually index linked, raising the base price of the apartment.
Discounts on paper may not be as real as they seem. After all, your money is tied up for much of the time and you may have to pay rent simultaneously. Additionally, new apartments often require significant additional investment despite much vaunted claims of many extras being included. Also bear in mind that the development may be in an area where there is going to be continued construction for years to come. This means poorer transportation links and amenities, not to mention the extra dust and noise. If buying for investment, bear in mind a possible oversupply of new apartments for rent. It may be harder to find a tenant at what you believe is the market rent.
Using the services of an experienced interior designer is strongly recommended before making ANY commitment, even just the “reservation” form. Changes requested afterwards will be much more difficult to negotiate and will inevitably cost you much more. Hiring an independent engineer to check on the work being done is a good idea. Not all builders are happy with having outsiders coming onsite during construction, so this is an important point to check beforehand. Don’t sign on a booking form until your professional representative has had a chance to negotiate all the terms or changes for you.
Be prepared for delays. The compensation clauses do not give you an automatic, immediate or full entitlement to money to cover any extra rent you might have to pay until the apartment is complete. Purchase or purchasing groups ostensibly provide a cheaper way of buying property in Israel. The former are a group of non-related buyers or a non-profit organization that acquires the land and together hires a contractor to build for them. There are sometimes tax savings on the land. However, there may be delays, unforeseeable expenses and overruns. Many costs are not avoidable. The latter may co-operate with a developer to bid together and gain a smaller discount, eliminating risk for the developer. This is a low risk form of bulk buying, but there may be less flexibility with design.
Today, the government’s main platform for “solving” the housing crisis is through the sale of new apartments via the “Target Price” program. This program is aimed at a very limited market and we will cover this topic in more depth next in month’s issue. The subject of building your own home will also be covered separately. To sum up, buying in Israel can be both challenging and yet also rewarding. It is my hope that this article will have proved to be a helpful resource for you in your quest for a new apartment in Israel.
The above information is intended as a general guide only and not intended to be an exhaustive compendium on the subject. Accordingly no warranty is given on any information herein. The writer, Ilan Rubinstein, UK born, is a licensed Israeli real estate agent with 15 years’ experience in Israel. Ilan is the C.E.O. of I.L.A.N. Estates & Investments. Ilan specializes in assisting olim acquire new and existing property, investments and businesses in Israel.
Tel: +972(0)774108011 Cell: +972(0)504-910-604