Wednesday, June 1, 2011

Steinitz to impose betterment tax on second homes

Minister of Finance Yuval Steinitz's plan for halting the rise in home prices includes ending the temporary exemption on betterment taxes in December 2012, in order to prod real estate investors to sell second and subsequent apartments before 2013. The current exemption applies only in 2011-12. The second measure aims to convert apartments used for businesses back to residential use. "Currently, 50,000 apartments or more, mostly in central Israel, are used for businesses by dentists, lawyers, and so on. We want to provide strong incentives to sell these properties by 2013 by giving a full exemption on the betterment tax," said Steinitz.

At the press conference, Steinitz said, "For months, I have been considering additional major measures to halt and change the dynamic of housing prices in Israel. Housing construction has been reduced for almost a decade, and we estimate that a shortfall of 50,000 apartments is the result. In the past three years, this shortfall combined with the low interest rate, has resulted in a sharp rise in prices, which have reached a level that seriously harms society." Steinitz said, "Until now, we've been using 500-gram hammers to pound the problem of rising prices, but we’re now pulling out a five-kilogram sledgehammer to deliver a serious blow to home prices in the second half of 2011. I am keeping the 10-kg. sledgehammer in reserve, and if prices don’t fall by the end of the year, we'll considering using this bigger hammer."

Israel Tax Authority director general Yehuda Nasradishi is unimpressed by Steinitz's proposed measures. "I see almost no effect because I don’t see these guys selling their apartments so quickly," he said.

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