The tax on the purchase of second homes will increase to 8%

The tax on the purchase of a second apartment will be raised to 8 percent, after the Knesset plenum has approved the second and third readings.

The tax will be immediately raised from its current level of 5%. The properties will be taxed at 8% up to NIS 5,843,565 and at 10% on any part of the value that exceeds this amount.

The law was set as a temporary provision for three years, with the possibility of extending it for another two years with the approval of the Finance Committee.

Seventeen members of the Knesset supported the bill, while 10 opposed it. The tax is intended to help curb house prices and moderate demand for apartments.

The purchase tax was 8% until July 2020, when then-finance minister Moshe Kahlon lowered it to 5% in an effort to encourage more investors to buy properties. Investor demand rose sharply after that, going from 13% to 20% of all home sales on the market and contributed to the sharp rise in home prices since then. This, in turn, pushes young couples out of the domestic market, the explanatory memorandum for the proposal noted.


House prices in Israel have risen by an average of 9.9% in the past 12 months and have more than doubled over the past decade, according to data from the Central Bureau of Statistics. The government has made controlling price increases a primary goal of the coalition and has set itself the goal of increasing the number of apartments by 300,000 in the coming years.

Last month, Finance Minister Avigdor Liberman, Construction and Housing Minister Ze’ev Elkin and Interior Minister Ayelet Shaked presented a comprehensive plan to cool the market, with 17 different components aimed at increasing the housing supply, bring structural changes to the market and introduce short-term tactics to cool demand and increase supply. The purchase tax increase was one of the items listed at the time.

The lack of housing supply is considered the main reason for the increase in prices, along with historically low interest rates and the increase in capital markets. The Israel Land Authority (ILA), the government body in charge of managing land use in Israel, is widely accused of neglecting the availability of new land in an efficient or transparent manner.

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