The IsraTransfer Report: August 2020

In this Issue:

• The Latest from the IsraTransfer Trading Desk

• Lower Tax on Property Investments

• Israel Cybersecurity Flourishes

• Real Estate for "Corona Zionists"

• Hope for Travelers?

• Digital Panel on Buying a Home in Israel

From the IsraTransfer Trading Desk

The last week the US dollar barely moved against the shekel. The pair traded in a range between 3.40 and 3.42. With very little economic activity, the dollar was more or less stationary. 

It is a slightly different story for sterling. The pound climbed above 4.40 for the first time since March and stayed there for more than a moment. There is a potential for it to move up to 4.50, which will make a lot of people very happy.

The euro had a good week against the shekel, as it moved above 4.00 for the first time since the spike in March. The currency's strength is mainly due to the Covid-19 economic pact made and agreed in Europe.

New! You can now catch IsraTransfer's daily currency updates on our Facebook page weekly from Monday - Thursday! 

Lower Tax on Property Investments

July brought good news for investors and move-up buyers! Minister of Finance Israel Katz announced his intention to lower purchase taxes on investment properties from 8% to 5%. The Knesset approved the revision this past Wednesday. 

Knesset approves investment home purchase tax cut

The starting purchase tax imposed on foreign residents and second-home buyers was initially 3.5% but was raised to 5% by Minister of Finance Yair Lapid in 2014. Moshe Kahlon, his successor, brought it up to 8%, a 60% increase. That percentage was only for homes below 5.3 million shekels, whereas on more expensive homes, investors paid a whopping 10% of the purchase price. 

According to analysts, Kahlon's motive was to reduce the number of individuals buying real estate for investment purposes to lower housing costs. This move would enable first-time buyers to afford available homes. The initiative, alongside Kahlon's Mechir L'Mishtaken plan, was meant to benefit young couples and average citizens looking to purchase a home. 

Many believe the tax increase did succeed in scaring off investors, and caused investment purchases to drop from 30% to 13%. Numerous investors looking to buy and then rent out the homes considered that 8% is nearly three years of the rental return on the property and opted to seek alternative ventures such as office space purchases or real estate in other countries. The move also hurt construction companies as they either produced fewer projects or had to sell their properties at a lower value to lure investors into buying even with the tax. Less real estate investments lowered the amount of taxes the government was collecting overall, and the State received 3 billion shekels less revenue during that period. 

With the country currently desperate for funding its Covid-19 related relief programs, state revenues are of prime importance. The lower rates will hopefully cause a higher turnover in real estate deals, thereby pumping money into the government while allowing those who would like an investment or a second home in Israel to buy one for a lower price. 

Israel Cybersecurity Flourishes

While many startups are hurting under the corona-related pressure, Israeli cybersecurity companies continue to soar. The current pandemic seemingly opened the floodgates for new digital threats, and Israeli innovation is ready to fight the current and future attackers.  

Israel is considered one of the world leaders in the field of cybersecurity. The many startups originating here have developed innovative solutions to combat the growing digital threats across the globe. Many speculate Israel owes its success in this area to the military. Future company founders often gain valuable experience at a young age in elite units such as 8200 or 81. High ranking academic institutions and courses that excel in the field and the Israeli "startup nation" spirit add to the county's expertise in this area. Also, the cybersecurity ecosystem feeds itself. When the heads of startups sell their companies for millions or billions, they start new ones or become mentors to the next generation of cyber innovators. 

While Israeli tech exits hit a six-year low, many cybersecurity companies made millions. This month, ForeScout, an automated network security platform, was sold to Advent for $1.4 billion. In July, XM Cyber, which developed a platform for simulating cyberattacks, raised $17 million from investment firms. This month's winners also include Israeli cybersecurity company CyCognito, which raised $30 million, and Check Point, which reported higher profits despite the current pandemic. 

In an interview with Calcalist, Lonne Jaffe, Managing Director at venture capital and private equity firm Insight Partners, described why Covid-19 led to more cyber attacks. He explained that many people are now working from home, and they no longer benefit from their companies' secure networks. Workers' laptops, often personal ones, are used to accessing highly classified information without proper security. Furthermore, many companies have to retool how they deliver products and manage their supply chains, using digital platforms in new ways. Attackers are aware of these potential vulnerabilities and are taking advantage. 

Platforms enabling people to work from home, such as VPN tools and Zoom, also have weak points making them vulnerable to hackers. The more companies become reliant on these tools, the more vital cybersecurity becomes, leaving one area of the Israeli business sector likely to see growing success. 

Real Estate for "Corona Zionists"

Stats from the Jewish Agency and Nefesh B’Nefesh have been pointing to a rise in aliyah applications, seemingly caused by the current pandemic. The phenomenon, coined “Corona Zionism,” seems to be motivating native Israelis living abroad to return to their roots. According to a recent article, this may be due to a perception that Israel is better handling the pandemic than other countries, despite the recent uptick in cases. There is also a feeling that Israel feels a sense of mutual responsibility and has a more significant commitment to saving lives. 

Real Estate companies have been reporting an increase in foreign residents checking out their website and inquiring about properties. The new buyers are from a range of socioeconomic backgrounds. Some are interested in purchasing inside expensive cities like Jerusalem, Ra’anana, Tel Aviv, etc. Others are looking for more affordable options in places like Ashkelon, Netivot, and Harish. 

A new project gaining the attention of prospective immigrants is “Lipstick on the Park” in Be’er Sheva. It is currently under construction with plans to contain seven buildings with 168 housing units, including large apartments and penthouses. The sizable homes are suitable for families and start at 1,150,000 ILS. 

If you are looking to buy property in Israel, check out IsraTransfer’s recent digital panel on “Buying Property in Israel During Corona.” 

Hope for Travelers? 

While many are itching to come to Israel, others want to go on vacation abroad without having to sit in isolation upon return. The tourism industry is suffering, and many have lost their jobs. Hopes for summer tourism were squashed with recent news from the Airports Authority, stating that restricting foreign visitors from entering Israel due to the pandemic will be extended until the beginning of September. 

At the moment, only immigrants, citizens, and visitors who obtain special permission are allowed in the country. Even those travelers are subject to a two-week self-quarantine. With the recent surge in infections, the ban is unlikely to be lifted without some innovative policies. 

One idea gaining momentum is to set up corona testing stations at the airports to bring back air travel. Other countries are implementing, and the Israeli Airports Authority is establishing a testing lab in Ben Gurion Airport. Passengers flying to Israel would be required to get tested 72 hours or less before their flight and will be tested once again upon arrival. While the added element of testing might increase the cost of flying, it would only be by a small amount and would be worth it. 

For this initiative to take place, the Ministry of Health would have to agree to allow private companies to carry out the testing, something that they currently oppose. Once the plan is approved, it will take three months to set up the laboratory and, hopefully, travel will resume. 

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In Case You Missed It...

Digital Panel on Buying a Home in Israel

On July 12, IsraTransfer decided to "bring Israel to you" by co-hosting a digital panel in partnership with experts in local real estate. The discussion covered how to buy a home in Israel and specific tips for corona times. We answered our listeners questions about purchasing property, buying when residing abroad, taxes, neighborhoods to live in, transferring funds and more! You can watch the video here.