Yair Lapid, the Finance Minister has been working to get his law passed to cancel out the VAT of 18% on home purchases for apartments that cost under 1.6Million NIS. This law would only apply to Israelis who have served in the IDF, and pay their taxes.
He promised that it would go into effect in September, but it has been stalled in committee by Netanyahu who says that it needs more study. The government cannot afford at this time to reduce the VAT on homes, because of the increased costs of Tzuik Aiton, the operation that happened over the summer.
What is the effect of this proposed law? Well for one thing, the people who are targeted under the law have stopped buying apartments now. They are waiting to see if the price will go down under the law, or if the contractors will find someway to make up the shortfall. Also, the price of the apartment is only 1.6million NIS. This price is almost impossible to find in the big cities. It means that you will get a small 2 or 3 room apartment. If you are a young couple, you will outgrow the apartment rather soon, when children are born. It is better to buy a bigger apartment and stay there for a long time.
Why only cancel the law for that segment of the population? Housing is a big problem for everyone, not just people who have served in the IDF. The current prices are very high for the average wage-earner and many people have to wait years to build up a down payment to buy an apartment.
The cancellation of the VAT would help everyone. The government wouldn't lose out if suddenly many people started buying apartments with zero VAT. There are lots of different taxes on apartments that the shortfall would be made up in volume.
The VAT would still apply to materials bought by contractors to build the apartments, and so on.
In the meantime. I suggest that everyone just sit tight and save your money. Wait and see what the government is going to do.
Rachael Alice Orbach http://lifecoachjerusalem.weebly.com/
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