New York contains a large number of listings that will be affected by the new mansion tax. (Image via Pexels)
Updated 7/25/2019 with new report from Crain's
For all of the buzz surrounding New York City's recently enacted "mansion tax," is it not the first time such a duty has been imposed. In 1989, Governor Mario Cuomo levied a 1% tax on statewide homes that sold for $1 million or more. Analyst Constantine Valhouli of NeighborhoodX notes that the median price of Manhattan apartments was $265K at the time.
For all of the buzz surrounding New York City's recently enacted "mansion tax," is it not the first time such a duty has been imposed. In 1989, Governor Mario Cuomo levied a 1% tax on statewide homes that sold for $1 million or more. Analyst Constantine Valhouli of NeighborhoodX notes that the median price of Manhattan apartments was $265K at the time.
Thirty years later, Ken Griffin’s record-setting purchase in 220 Central Park South sparked new discussions of doing more to tax the new wave of uber-luxury listings. Several City Council members supported a pied-a-terre tax to help pay for New York infrastructure, but the real estate lobby shot that idea down. In its place rose the new mansion tax, a one-time tax collected at closing with nine progressive tiers that start at 1% for homes from $1 million and goes up to 4.15% on homes $25 million and up. 6sqft notes that it could raise as much as $365 million for the MTA.
"Today there are studio apartments that meet this rule's threshold to be taxed as mansions." - Constantine Valhouli, NeighborhoodX
The mansion tax took effect on July 1, and the deadline lit a fire under all parties in the New York real estate industry. Julia Hoagland of Compass reported that she had a client who was not in a hurry to buy until she found out about the tax; Ms. Hoagland’s team then worked with the seller’s agent, attorneys, and the management team to close in an efficient manner. Dorothy Schrager of Warburg Realty said of one recent transaction, “We made it a contractual requirement to close before July 1.” Real estate lawyer Bruce Cohen told The Wall Street Journal that he and his partner each handled seven closings on a single day last week.
Recently released reports back up the anecdotes of greatly increased activity in the weeks before the tax. Brown Harris Stevens’ market report showed that new development closings jumped 71% compared to the second quarter of 2018. Douglas Elliman’s market report said that year-over-year sales increased for in June for the first time in six quarters, and that the median sales price increased by a record 10.5 percent. It notes that most of the growth was seen in the $2-5 million price range, or at a point where buyers would have to pay a tax of up to 1.5%. A Wall Street Journal analysis showed that 14 sales closed for $10 million or more in a recent seven-day period, a higher number than any other over the past two years. The trend is not limited to condos and co-ops; Crain's reported that townhouse sales in Manhattan and Brooklyn soared to the highest level in ten years.
The flurry of activity is not expected to last. Douglas Elliman report author Jonathan Miller noted that “the uptick in activity is essentially poaching from the third quarter. Logic says…we’ll see a lower level of activity in the next quarter.” Mr. Valhouli took a more pragmatic approach, reflecting that “going forward, this will just be part of the ordinary cost of doing business in New York City with regard to residential real estate.”
Lead image via Pexels
6sqft delivers the latest on real estate, architecture, and design, straight from New York City.
