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Find Your Ideal Property in Israel

One of the things that I pride myself on is having a complete understanding of my client’s needs. This understanding results from a consultation where I ask my clients questions about what they’re looking for in a property. Below are the topics that I typically cover with my clients during the initial consultation.

Location

As the old saying goes real estate is all about location, location, location. The first step to find your ideal property in Israel is knowing where you’d like to live. Israel presents options for both urban and rural living and includes a number of different landscapes and terrains. For instance, northern Israel features mountainous terrain while central Israel is mostly flat, with fields and pastures for agriculture. The south, on the other hand, mostly contains a desert landscape. It’s important to understand the various options, so you can determine your preferences for your desired landscape and setting.

Location graphic- Find your Ideal Property in Israel

Step one: find your perfect location. Photo courtesy of rawpixel.com on unsplash.

Most Israelis live in the center of the country in cities like Tel Aviv, Jerusalem and Netanya.  For the purposes of this article, I’ll reference Jerusalem, as I mostly deal with real estate in Jerusalem. The holy city has a number of different neighborhoods in regards to atmosphere, architecture and price. The best and most expensive areas can be found in the city center.  The city center contains any neighborhood that sits within a 45-minute to the Old City. These neighborhoods are Rehavia, Baka, Talbieh, Old Katamon, the German Colony, the Greek Colony and Kiryat Shmuel.

Size

Once you’ve settled on an area it’s important to determine your ideal size for a property. Apartment size in Israel is based on the metric system (square meters or Sqm), and most property listings show the total number of rooms.  Be aware that this number includes the living room. This means that a three-room apartment is a two bedroom apartment with a living room. The size of properties varies; however, the below range accurately describes apartment size depending on the number of rooms:

  • 3 rooms: 60-85 sqm
  • 4 rooms 85-100 sqm
  • 5 rooms or more 110 sqm +

Choosing the right size for your apartment is crucial because floor plans vary. A larger apartment gives buyers more freedom to add bedrooms or increase the size of rooms with renovations. Renovating apartments is a very common practice in Israel, and you shouldn’t discount an apartment if you’ll need to renovate.

Important Factors

Once you’ve narrowed down the area and size that you’re looking for there are other factors that you must consider. The below factors may first seem insignificant, yet many clients realize their importance during our consultation.

Parking

Parking can be a serious issue In Jerusalem depending on the nieghborhood. Israel’s a small country, and most cities haven’t been properly planned for the number of cars that residents keep. For this reason, it’s important to understand the importance of private parking versus street parking. Street parking means first come first serve while private parking means a guaranteed spot. Private parking also varies, as some buildings feature lots with unmarked spaces. Unmarked spaces mean first come first serve, so you’ll want a mark space if like a specific parking spot. You’ll also want to confirm if the parking spots are covered.  Jerusalem brings hot summers, and a covered spot can defend your car’s paint against sun damage. Covered spots also mean that you won’t be caught in the rain or snow while running to your car.

Balconies & Terraces

One of the best things about Israel and Jerusalem is the weather.  Most days are sunny meaning you can comfortably sit outside for most of the year. For this reason, many people have balconies and when possible, terraces as part of their homes. If a balcony or terrace is important for you then there are a couple factors to consider.

The first factor is size, as some balconies can be very small, while others can be the size of an entire apartment. Consider the intended use of your balcony. Do you want a small space to have a coffee or a large space to host a family meal?

The second thing you have to consider, similar to parking spots, is a covered vs. uncovered balcony.  Uncovered balconies are also referred to as Succah balconies. Traditional and religious Jews will often build a Succah (pictured below) during the autumn holiday of Succot. These balconies must be uncovered, so you can look up and see the stars from within the Succah.

Succah Terrace- Find your ideal property in Israel

Above is a great example of a Succah balcony, as you can see that the balcony is uncovered. Image courtesy of pharmacie esperanze on Flickr.

Building Material

Almost all of the houses in Jerusalem are constructed with Jerusalem Stone on the outside (pictured below).  Some homes may have brick, cement or stucco outer walls, yet all homes have a foundation of cement. Make sure you decide on your most aesthetically pleasing exterior before you start visiting properties.

Jerusalem Stone- Find your ideal property in Israel.

Almost every building in Jerusalem is built with Jerusalem stone (shown above). Image courtesy of Vladimir Gitin on Flickr.

Elevator

Elevators are very important for many people, yet some older buildings have no elevator.  If you’re looking for an apartment above the ground floor make sure to verify that the building has an elevator. Also, check if the building has a Shabbat elevator (stops at every floor on Shabbat) if you observe Shabbat.

Storage

If you’re looking for an apartment as your permanent home chances are you’ll need some extra storage space. Not all apartments come with enough closets or private storage spaces. Make sure to ask about storage if you have bicycles or larger sporting equipment like kayaks or surfboards.

Amenities

Some buildings come with extra amenities that can significantly increase your standard of living.  Examples of such amenities are security, a pool, gym, sauna and a concierge service. These amenities can provide a true luxury living experience, yet they come at a price.  All buildings require tenants to pay”Vad Bayit” or a building maintenance fee. Buildings with amenities such as security can easily have a Vad Bayit cost of 2,500 Shekels or more. Vay Bayit on buildings without amenities usually costs between 100-200 Shekels.

 Boutique vs. Large Building

Israel and more specifically Jerusalem has a wide range of building types. It’s now common to find high rise apartment buildings next to classic Arab-style houses. While some people don’t mind living in a busy complex with hundreds of neighbors others prefer a quieter setting.  Keep in mind that quieter, boutique buildings often bring a higher price tag.

Arab-style house- Find your ideal property in Israel

Many Arab-style homes have been converted into Boutique apartment buildings. These buildings often feature arched windows and high ceilings. Photo courtesy of Adrian Whittle on Flickr

Old vs. New Construction

The age of a building is very important for a number of reasons. The first is aesthetics.  Older buildings tend to have more character than new construction. For instance, an Arab-Style home will have the classic arched windows and high ceilings that you will likely not find in new construction.

The second thing to consider is the impending renovation of an older building. Many of the apartments built in the early to mid 20th century will require renovations in the near future. The building itself could also require renovations as part of Israel’s Tama 38 initiative to strengthen buildings against earthquakes. Tama construction takes at least two years. Contractors must sometimes demolish and rebuild the building, so you may not be able to utilize the property during construction.

At the same time, an impending renovation could be a great investment.  If you’re in no rush to move in,  you’ll be buying an apartment for less than what you’d spend on a newly constructed apartment. Renovations also give you the freedom to choose your own layout, fixtures and finishings. If you’d like to customize a property, buying an older apartment could be a great fit.  In any case, make sure to ask about any impending Tama 38 construction or scheduled renovations.

Quiet vs. Busy Street

Many people don’t like to live on busy streets due to the noise and congestion that often accompanies such streets.  At the same time, some people are mostly out of the house during the day and aren’t bothered by traffic and noise throughout the day. Think about what works best for you in this case, as too much noise, or in some cases not enough can be a deal breaker for some buyers.

View

If you live in the centre city of Jerusalem in a third or fourth-floor apartment there’s a good chance that you’ll have a nice view of the Old City.  Talbieh and Mamilla will get you even closer, as they sit directly next to the Old City. Other apartments have views of parks, surrounding neighborhoods and even the surrounding Judean Mountains.  Any of these views can completely change the ambience of a home, so make sure to weigh the importance of a nice view.

Lighting and Air Exposures

Nearly every day in Jerusalem is a sunny day, meaning every apartment has the potential to be well lit during the day.  Still, it’s not a guarantee, so if you prefer lots of natural light in your home you’ll want to find a property with large windows facing the South and East.

Air exposures are also something to consider, as Jerusalem features plenty of fresh air due to its elevation (754 meters above sea level on average).  Many Jerusalem residents simply keep their windows open to cool their homes except for on the hottest summer days. In order to have this option, you’ll want to find an apartment with as many air exposures as possible, so you can naturally create a flow of fresh air throughout your home.

High Ceilings

Typical Israeli ceilings are 2.7 meters high, yet some ceilings can be 3.5 meters or higher.  High ceilings can typically be found in Arab-Style houses, yet some newer, more luxurious builds specifically build higher ceilings.  Some buyers feel that higher ceilings make an apartment feel larger and provide a better flow of air, so make sure to think about if you too prefer higher ceilings.

Price Calculation

Apartment prices can be calculated based on the price per square meter for a specific neighborhood. For example, a house in Old Katamon costs $10,000 USD (3500 Shekels) per Sqm, so if you want a 100 Sqm apartment you’ll be spending around $1 million. Below are the price breakdowns for some of the neighborhoods in the center city of Jerusalem:

  • Old Katamon & Baka-$10,000 USD/Sqm
  • German & Greek Colony-$11,000/Sqm
  • Talbieh & Rehavia-$12,000/Sqm
  • Mamilla-$13,000/Sqm

Notice that the prices of apartments increase as you move closer to the Old City, as Mamilla leads to the  Jaffa Gate, one of the four entrances to the Old City. Another thing to consider is that the above prices are averages that can go up or down depending on the inclusion or absence of certain key features.

For example, an apartment in Old Katamon doesn’t have an elevator or parking, so the price goes down to $8,500/Sqm.  On the other hand, an apartment in Rehavia that was just renovated and features a private garden could cost $13,500/Sqm. For these reasons, it’s important to understand what should increase or decrease the price of your desired property, so you can make sure that the asking price matches up with the market value.

Types of Land

Israel features three different types of land, and one type of land, in particular, could decrease the price of your future property.  Some neighborhoods in Jerusalem, such as Talbieh, contain a large amount of land that was purchased from the Greek Orthodox Church. In reality, the lands were actually leased from the Church, and some of these leases will expire in 2050.  For this reason, apartments on Church-owned land are typically 30% less than those on other types of land. Although these properties carry a significant discount some buyers are wary of purchasing apartments on church-owned land due to the unknown future of the land beyond the year 2050.

In addition to church-owned land, there are two other types of land: government-owned land and privately owned land. The government-owned land is somewhat similar to church-owned land, as you’re essentially leasing the land from the government, yet there’s no discount for buying such land. Privately owned land provides the best option, as the land is yours. There’s no difference in price between government-owned and privately owned land, yet private land provides more stability making it the most preferred option when available.

Price Negotiation

For those of you who’ve been to or live in the Middle East, you already know that negotiating is simply part of the culture.  Whether you’re trying to get a better price for tomatoes in the Mehane Yehuda market or for an apartment in Talbieh, you’re going to find yourself haggling at some point.  This begs the question, how much flexibility is there in real estate transactions? Typically sellers will be flexible between 1-2% of their asking price, so don’t be embarrassed to offer 2% less than the asking price. Sometimes people will be in a big hurry to sell due to things like divorce, and in these cases, you can offer between 5-10% less than the asking price.  Note that 10% is only in the most extreme cases, so exercise caution if you really want the property.

 

Closing Agreement

Once you and the seller come to an agreement the next step will be to have your lawyer and the seller’s lawyer come together to write a contract from the sale. This contract will detail the price, what it includes, amount of money due at the signing, and any other important details. Once the contract is signed your lawyer should add a HeArat Azhara or a note in the land registry informing any other prospective buyer that the sale of the property is in progress. This protects you from the owner selling to someone else after you’ve signed the contract.

Financing

I’m intentionally not delving into the topic of mortgages in this post, as it’s quite a complex topic in itself, and you may already feel overwhelmed by all of the above information.  For that reason, I’ll just get into the basics. Mortgages require different amounts for down payments depending on the number of properties already owned by the buyer.  For example, a first time home buyer in Israel (who has made Aliyah or is an Israeli citizen) has to put a minimum of 25% down for a property. People typically put more money down as a larger down payment decreases their monthly payment and gives a lower interest. That’s all I’ll get into about mortgages for this post, and I’ll make sure to delve deeper into the topic in a future post.

Taxes and Fees

Mas Rechisha

You need to pay taxes on a home when you buy or sell it in Israel.  For a buyer, this is called “Mas Rechisha” and differs depending on your tax bracket.  New Olim also receive a discount on Mas Rechisha for seven years after making Aliyah, so make sure to take advantage of this discount if you fall into that category. Just to give you a point of reference, an Israeli Citizen would have to pay 89,301.90 Shekels for a 3,500,000 Shekel or $1,000,000 USD property (about 2.5%). Note that the rate changes based on the number of properties you own, your status as an Israeli citizen, foreign investor or new Oleh.

Broker Fees

Broker fees are 1-2% of the sale price.  Although you don’t have to use a broker, most people in Israel today choose to use brokers as they help to facilitate the process, saving you lots of time and stress along the way.

Property Tax and Vad Bayit

Once you’ve purchased the property you’ll be responsible for the property tax or Arnona (not to be confused with the neighborhood called Arnona in Jerusalem). Arnona can be paid bi-monthly or yearly (slight discount if you pay for the year up front), and it’s based on the size of your property.  If you plan to rent out the property you can have your tenants register themselves with the municipality and pay the Arnona directly.

As I previously mentioned, Vad Bayit will be the building maintenance fee that you’ll pay on a monthly basis.  For average buildings, this covers cleaning and landscaping fees, and for more upscale buildings Vad Bayit will cover everything from parking to security.

I know that’s a lot of information to take in, so don’t feel overwhelmed. Purchasing a property is a big deal and there are a great number of things to consider before making the best choice.  I recommend taking your time and not settling for the first property you see unless it meets all of your requirements.  I also highly endorse using a broker to help you find the right property.  Buying a home can be a daunting task, and there’s no reason for you to take this task on by yourself, especially when there are brokers like me out there who are glad to offer a helping hand 🙂

 

 

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Michael Steinmetz

Jerusalem Real Estate

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