Buildings on “Billionaire’s Row” along Central Park South. (Photo by Gary Hershorn/Getty Images)
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Prospective home buyers in New York are rushing to close contracts by the end of the month to avoid paying the city’s updated “mansion tax,” which will increase as of July 1.
The tax, which previously took 1% from sales of $1 million or more, will now rise incrementally from 1.25% for $2 million to 3.9% for $25 million and above. Though the city government has assured that revenue, a projected $365 million per year, will be funneled into its ailing subway system, the revision has been met with backlash from real estate professionals and other affected parties.
Regardless, the tax hike is coming, and buyers are trying to avoid it if possible, New York City real estate experts said. The trend was a hot topic of conversation at this week’s meeting for the New York Residential Agent Continuum (NYRAC), an industry association, noted Leonard Steinberg, an agent and chief evangelist with Compass. Steinberg said he’s personally seen numerous closings in the last few weeks that were expedited to beat the deadline, which is actually June 28, the last business day before July 1.
The tax hasn’t drawn a crowd of buyers to the market who wouldn’t otherwise be interested, he clarified. “It isn’t a mad rush but it did give people who are already in the market a sense of urgency,” Steinberg said, adding that it behooves those who are in the buying process to hurry – or in his words: “Run.”
Those who are thinking about buying can still do so in the next 10 days if they can pay cash or can speedily obtain financing, Steinberg added. It’s especially possible for private homes and new developments, such as 100 E. 53rd St., where Steinberg is head of sales, which don’t have strict co-op or condo board approval processes, he said.
The urgency contradicts recent market findings, which showed that the city’s sales market is slowing this year, with would-be buyers camping out in rentals to await the possible results of a new federal property tax. Compass’ own first quarter report found that closings were down 6% from that time last year.
New York City has seen some headline-grabbing transactions so far this year though, such as Ken Griffin’s record-breaking $238 million penthouse in 220 Central Park South, and some have speculated that even these deals strategically beat the July 1 hike.
But “this is not pulling people in that had no intention of buying a property,” agreed Jonathan Miller, CEO of the real estate appraisal firm Miller Samuel, which compiles market reports for the brokerage Douglas Elliman. “The tax has modified consumer behavior so instead of a consumer that organically would have closed in July or August is rushing to make it earlier than July 1,” he explained.
A quick survey of Douglas Elliman brokers found that more than 20 contracts being brokered by the firm are slated to close by June 28, many with deadline contingencies included in the wording. “There are penalties that are added into the contract,” explained Ben Glazer, an agent with the firm. “If the seller holds up the closing and everything else is ready to go, the seller will be responsible for the [monetary] difference.”