From long-winded timeframes, given to receive planning approvals and building permits, to shortage of skilled professionals, poor building standard and high cost of Building Materials, building your house in the  ‘promised land’ can easily become a never ending, money wasting nightmare. 

 

Therefore, when building your house in Israel in 2024, one should consider the following cost:

 

1. Land purchase fees

 

• Land Purchase cost

• Stamp duty / purchase Tax - 6% of purchase price

• Agent’s  commission - 1-2%

 

2. Development Fees (if applicable)

 

• ‘Development Fee’ (דמי פיתוח) - this depends on the size of the land and proposed area of construction and can be easily calculated subject to the local authority fees. Development fee can start at 75,000 ILS and easily climb to 150,000 ILS per residential unit and should most likely be taken under account when considering to develop on an empty land with Planning approval.

 

• Planning Improvement / betterment fee (היטל השבחה) - when considering to change or enhance planning to create additional units or areas - a planning betterment fee should be considered. The cost would be valued by the appointed authority surveyors and should reflect 50% of the additional value achieved by the planning enhancement / betterment made. 

 

• Building permit payment (אגרת בנייה) - similar to the development fee noted above, this also depends on the size of the proposed area and construction. Unlike the development fees, Building Permit Fees are much lower and can range from 10,000 ILS to 25,000 for a large residence. 

 

When looking to purchase a plot in Israel with Planning Permission (תב״ע), the three development fees noted above may or may not be included in the purchase price. Therefore, considering the sums mentioned, it is critical to investigate whether these payments have already been paid by the seller or should be paid by the purchaser. 

 

3. Design, Permits and Legal fees

 

Design and professional fees for architects, engineers and other required designers, this should also include any fees for management, surveys and investigations. 

 

• Design fees do vary, but can range from 7-15% of the construction cost.

• Legal fees - do vary as above, but at least 1-2% of the construction cost should be set aside for Legal fees and Misc.

 

4. Construction cost

 

Finally, getting to the main point, If you still haven’t ran away from all the costs above. Of course, there is no easy answer. Construction cost is normally dictated by the site location, type of soil, the proposed design, construction methods, procurement strategy, materials, products, equipment, fixtures and services required. 

 

• In 2024, one should anticipate to complete a house at around 7,500 ILS per m2 to 15,000 ILS per m2. Again, a fairly large range which is subject to some of the elements above, although we would anticipate that a budget of 10,000 ILS per m2 for a good standard house can be achieved in most cases. 

 

5. Cost of Interest

 

Cost of interest in the past 2 years has been considered to be at its highest point of the century. Therefore, cost of interest for money borrowed can play a major role. For those who will require financing, they will be expected to pay around 6% - 9% from the total money borrowed, annually. 

 

Considering the average yield (returns) today in the residential market in Israel range from 3%-7%, it could potentially lead to high monthly financing payments which the property could not obtain in the open rental market. Therefore, when seeking for a high LTV (Loan To Value) ratio such as a 50%-60% mortgage loan, this element should be considered. 

 

For Conclusion, building your home in Israel can become a Costly and Time consuming process. That's why at SOLANDSEAS, we are fully committed to manage the entire Acquisition, Design and Construction process for our clients in the most dedicated, professional and genuine manner, to ensure our clients can build their home in Israel in the most Cost effective and Time efficient strategy, whilst not compromising on their specific requirements and wishes to achieve outstanding Quality that withstands the test of time.