The number of Israelis who own three or more apartments has risen by 40% since the end of 2018, double the rate of increase in the number of individual homeowners during the same period, according to data from the Israel Tax Authority given to "Globes." The data, updated to this month, comes in the wake of opposition by the political leadership to require real estate investors to report, reinforcing the Ministry of Finance's estimates that the investment real estate industry serves as a basis for money laundering and tax evasion. The figures also show that 1.63 million people in Israel own one apartment; 290,000 own two apartments, and 86,000 own three or more apartments.
Rising trend in multiple home ownership
While the Israel Tax Authority data show a 40% rise in the number of Israelis owning three or more apartments since the end of 2018 and a 21% rise in the number of Israelis owning a single apartment, the number of Israelis owning six or more apartments grew by 54% over this period and the number owning eight or more apartments grew by 66%.
An examination of the trends by timeline reveals that the year in which multiple homeowners in Israel increased the number of apartments they owned was at the highest rate in 2021, when an all-time record was set in the number of apartment purchases - 150,000, but also record purchases by real estate investors, who took advantage of the low purchase tax that applied that year (due to its reduction by former Minister of Finance Israel Katz). In total, multiple homeowners purchased 35,000 apartments - about 25% of all apartments purchased.
In 2021 multiple homeowners increased activity. If in an average year multiple homeowners add 4,000-5,000 apartments to their portfolios, in 2021 8,000 such apartments were bought. Overall they increased the number of apartments owned by 11%, while individual apartment owners increased their number of apartments by 8%. But from 2022 onwards, higher interest rates and higher purchase tax on second homes, has slowed this activity.
However, the numbers show that the real estate sector is still attracting a growing number of people, who see it as a significant investment channel, despite the low annual returns that this industry has been providing investors in recent years.
Encourages capital and tax violations
This data reinforce the claims by Ministry of Finance officials, that residential real estate suffers from a severe lack of regulation and supervision, and provides a potential breeding ground for capital and tax violations.
Over a decade ago an examination by the Ministry of Finance Chief Economist Division found that 19% of tenants who purchased an investment apartment between 2003 and 2012 earned only NIS 7,000 gross or less per month.
It also emerged that about 16% of landlords who purchased an apartment for investment and earned up to NIS 7,000 per household only, purchased at least two apartments for investment.
Published by Globes, Israel business news - en.globes.co.il - on March 14, 2024.
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