Sales of luxury apartments in the Big Apple seem to have slumped. As per a report by the Wall Street Journal, apartment sale prices in Manhattan fell in the third quarter of this year, reaching their lowest level in the past four years. Overall residential sales in the third quarter fell by 11.5% compared with the levels in the same quarter in 2018, according to the report. “Even with the rush before the taxes and hangover afterwards, we are still in a sluggish market,” said Gregory J. Heym, the chief economist for brokerage firms Halstead and Brown Harris Stevens.
By Ilana Siyance
As per Crain’s NY, the decline in prices is being attributed to the new tax increases for residential real estate costing over $1 million. As of July 1st, a mansion tax came into effect, charging homebuyers paying $1 million or more, an extra 1 percent over the purchase price. The added tax grows incrementally, with 8 individual tax brackets, charging a high of 3.9 percent for homes selling for $25 million or more. Formerly, the mansion tax rate was at 1 percent across the board, meaning that the highest 25 million mark saw a tax increase of nearly 3 percent. As an example, a NYC condo purchased for $2,500,000 will now incur a mansions tax due for $31,250, at a rate of 1.25 percent.
Also added was a transfer tax, which starts at 1.4 percent for homes that cost below $500,000 and reaches up to about 2 percent on homes priced at $25 million. The transfer tax is customarily paid by the seller, while the Mansion Tax is paid by the seller, within 15 days of closing. The tax increases were imposed in April, as part of the 2020 New York State budget. It is part of an effort to increase funding for mass transit, and the MTA’s crumbling subway system.
Before the taxes came into play, million-dollar real estate transactions in Manhattan were booming. The median sales price for apartments jumped almost 20% to $1.4 million in the second quarter. Then, at the start of the third quarter, the tax become effective, and the sales prices tumbled 25 percent to just above $1 million, which is the lowest median prices have been since 2015.
The new report is sure to be a disappointment to real estate developers who have been in a mad dash to complete their new ultra-luxury residential sky-scrappers which were conceived during the real estate uptick. Last month, a study by Street Easy revealed that roughly 25 percent of the new condos built in NYC since 2013 have yet to be sold.
