The Knesset on Monday approved Finance Minister Moshe Kahlon’s plan to increase taxes on apartments, a move intended to steer existing apartments out of the rental market and onto the sales market.
By making it more expensive for investors to buy apartments for renting out, the Finance Ministry hopes to keep more apartments on the market for home buyers, thus driving down the sales price.
The law will go into effect on June 24, not July 1 as earlier planned, in order to cover apartment buyers looking to quickly close deals ahead of the law coming into effect.
Tax rates will rise to 8 percent on apartments under NIS 1.12 million (currently at 5%), from NIS 1.12 m. to NIS 3.37m. (currently 6%) and from NIS 3.37m. to NIS 4.64m. (Currently 7%). They will rise to 10% on apartments from NIS 4.64m. to NIS 15.47m. (currently 8%) and remain at 10% for apartments over NIS 15.47m.
“I’ve seen the entirety of things they (the Finance Ministry) want to do in housing, and for the first time we are talking about a serious process and, if it comes to fruition, we are on the right path,” said Finance Committee chairman MK Moshe Gafni (UTJ).
Zionist Union MK Manuel Trajtenberg, who had run as his party’s nominee for finance minister, congratulated Kahlon for getting the ball rolling.
“This is the first step in the right direction after six years of absent policy for failed attempts to deal with the insane increase in home prices,” Trajtenberg said.
The bill hit a brief sang when opposition parties objected to how the new rules apply to siblings who inherit an apartment. The apartment would be considered an investment apartment only if three or more siblings inherit it.
“You must find a solution to inheriting siblings starting at two siblings, and not just from there up,” said Zionist Union MK Erel Margalit. “We should define ownership as over ‘a portion of the apartment’ and not a third of an apartment.”
The treasury promised to address the issue within a month, and the provision of a temporary measure in the bill brought most of the opposition on board to support it.
Finance Ministry director-general Shay Badad noted that the policy was the first in a series of steps intended to increase the supply of housing, but said this step was one that could have an immediate, if limited, impact.
Every percentage increase in the purchase tax, he said, would reduce the market of investors by 10%.