The building trade is bullish in Israel. (They always are.)
Nearly everywhere you look, there is some construction going
on. With the constant expansion of the population in this
young country, there is a lag between supply and demand for
housing. About two years ago, people made the news when they
pitched tents and set up homes near the Knesset as a protest
about the housing shortage.
Two main considerations before you buy should be the
following:
1. Your decision where to buy
Given all the possibilities and options to purchase a home,
where do you fit in?
It is not within the scope of this column to examine the
character of religious neighborhoods in Israel, but there are
wide differences between communities and a buyer must take
this point into consideration before investing. If it is not
for purely investment purposes, your purchase of an apartment
will bring you into a social framework that has to fit in
with your background and aspirations.
Unless you are very clear where you want to live, it might be
worthwhile to rent in a potential community, even though it
will certainly mean that you will move at least once more
before settling down.
2. Set up your financing.
A buyer must have concrete ideas and means to pay for the
apartment under consideration. A seller will be always
concerned that the potential buyer really has the financial
ability to meet his contractual obligations. Although the
U.S. dollar is a permissible currency to use in buying an
apartment in Israel, there are laws governing this too and
the fact is that most payments are carried out in Israeli
shekels, unless negotiated otherwise. That means that if your
money is in dollars, you probably will have to add on the
cost for changing dollars into shekels. On the other hand,
prices are often denominated in dollars, which means that
your "currency risk" will be lower than for someone who has
all his money in shekels.
The seller usually will give the keys to the buyer only after
or when the final payment is made. Title is usually passed
sometime soon after the final payment.
You often have a situation that the seller will be planning
to use the money from his sale in order to buy another
apartment, and he will be counting heavily on the buyer to be
reliable and to pay on time. Therefore, a seller will press
his lawyer to put maximum protection clauses into the
contract, including steep fines and the right to cancel the
contract for late payment.
Besides financing through a bank mortgage, loans are
available from insurance companies, olim societies, and
regular loans from banks which are very competitive and
worthwhile looking into, especially if you are not an Israeli
citizen or oleh, but prefer to buy on a foreign passport.
The government used to dominate the financial scene in
Israel, but it has been trying to get out for a long time.
There are now mortgages available called EMI that are similar
to those in the U.S. in that they do not require guarantors
and the cost of insuring the loan is included in the fees and
interest rate.
Mortgages for Israelis or immigrants who have rights
(zaca'ut), is a separate subject for discussion, but
for now, a buyer who takes a government loan or grant should
know that it is the Housing Ministry that runs the show, not
the bank that you deal with directly. Yes, the mortgage bank
helps you along, but it cannot deviate from the rules of the
Housing Ministry. The rules and benefits do change from time
to time, but generally speaking helpful loans and grants are
available to newcomers and others depending on their
situation. Discussing your particular situation with a
representative of a mortgage bank is an imperative first step
to clarify what you can get from the government.
If you are eligible to get help from the government, you
should waste no time in starting the application procedure
through any mortgage bank, since the bank needs a certificate
of eligibility (ishur zaca'ut) from the Housing
Ministry before they can apply for your particular loan. This
step can be done before you even decide which apartment you
want to buy.
You are not obligated to take the mortgage from the bank
which sponsored you in getting the certificate of
eligibility.
Next article: How to Find an apartment, 3 categories of
residential apartment investments.
Susan Scharman is a Jerusalem-based attorney.
