Thousands of Israeli Home Upgraders Face Property Tax Deadline

Approximately 10,500 Israelis who purchased new homes in the first five months of 2025, while still owning their previous residence, are approaching a critical deadline to sell their old property. These individuals initially paid property tax at the rate for a single home, with the understanding they would sell their prior residence within a legally mandated timeframe. This window is now closing, with the deadline for most of these buyers falling between now and the end of February 2027. Failure to sell the original home by the deadline will result in a demand to pay the difference in property tax, plus interest and linkage, calculated from the original purchase date.

The rules governing this period have changed multiple times in recent years. Generally, the law allows 24 months to sell the previous home. However, for purchases made between June 2023 and May 2025, this period was shortened to 18 months. A recent amendment in March 2026, related to Operation "Iron Fist," granted an additional three months to those whose selling period overlapped with February to May 2026, setting a new minimum deadline of August 2026. This means buyers between late August 2024 and May 2025 have up to 21 months, and those buying from June 2025 to May 2026 have up to 27 months.

For those who bought directly from a contractor, the clock starts 12 months from the scheduled or actual handover date. Buyers who received keys between late February 2025 and May 2026 have 15 months, with a minimum deadline of late August 2026. Buyers who purchased in late 2024 have already passed their deadlines. Those who bought between January and May 2025 are currently within their selling windows, with approximately 2,100 to 2,400 transactions each month during that period.

While official figures are unavailable, estimates suggest that a significant portion of these 10,500 buyers may still own two homes. Data from 2024 buyers indicated that about 70% had sold their old homes by March 2026, with many doing so quickly. However, nearly a quarter of upgraders whose deadlines ended by August 2025 failed to sell on time, a rate higher than the typical 7-10% in normal years. If a similar rate applies to early 2025 buyers, between 2,000 and 3,000 households could face a choice between lowering their price or paying substantial additional tax.

The financial implications are significant. For a 3 million shekel apartment, the difference in property tax between owning one home and two can be around 194,500 shekels, increasing with higher property values. This difference, plus linkage and interest, can amount to approximately 200,000 shekels. Some sellers may be forced to accept offers 150,000 to 200,000 shekels below their asking price, or even consider renting out their old apartment to avoid the tax penalty and wait for market recovery. The current property tax rates for additional apartments, set to expire at the end of 2026, are expected to continue due to elections, meaning future rate changes won't affect the tax owed by these 2025 buyers.