As a complement to the proposed measures already presented on November 15, 2010, today the Minister of Finance and the Minister of Construction and Housing presented further means of cooling the real-estate market. The measures include:

1. Higher purchasing tax on homes purchased as an investment:
In recent years, the proportion of homes purchased for investment purposes has grown significantly, to about 30% of all homes bought in 2009. This increase in the percentage of investors, who belong to relatively wealthy population groups, has contributed to the increase in prices over the last few years and to the process in which young couples have been pushed out of the home-ownership market. In response, the rate of the purchasing tax on homes (paid when the property is not the only home owned by the buyer) will be raised in 2011-2012, as detailed below.

While the increased taxation of investors cannot generate new homes for the market, it does bias the supply in favor of young couples and away from investors, and should help moderate the increase in prices. The implementation of this measure requires rapid legislation; the increase will take effect on January 1, 2011.

2. Additional exemptions from betterment tax on homes purchased as an investment:
Betterment tax on investment residences currently stands at 20% of the real betterment accrued during the period in which the home was owned (for homes purchased after November 7, 2001). However, the Land Taxation Law provides several betterment tax exemptions, the most common of which is the exemption for the sale of an eligible residence once every four years, even if the seller owns an additional home. This legal situation, although just, causes delays in bringing homes onto the market, as owners wait four years between sales for tax reasons.

In order to increase the supply of homes in the market, an additional exemption from betterment tax will be established as a temporary order for 2011-2012. The exemption will apply to sales of two additional investment residences, beyond the residence already eligible for an exemption, provided that the value of the residence sold is not greater than an amount to be established. The current legal situation will subsequently be reinstated. The implementation of this measure requires legislation, but the exemption will apply as of January 1, 2011.

Both measures join a resolution passed earlier by the Israel Land Council and approved yesterday by the Minister of Finance.

3. Return of agricultural land:
There are currently approximately 12,000 residential units for potential construction on agricultural land, about half in high-demand areas. Despite the availability of these projects, they cannot move forward due to the farmers' unwillingness to return the land to the Israel Land Administration (ILA). As an incentive for farmers to put this land on the market, thereby increasing the overall supply of land, the Israel Land Council has stated that any farmer returning such land to the ILA in 2011-2012 will receive compensation ranging from NIS 19,000 to NIS 46,200 per dunam (1,000 sq. m.). In addition, the farmer will be allowed to buy 20% of the land, at full price, with an exemption from auction, in central Israel, or 25% of the land in National Priority Areas. Following approval by the Minister of Finance, this resolution took effect on December 15, 2010.