Earlier this year, New York increased its mansion tax which is a one-time sales tax on homes that are sold for more than $1 million. Taking effect on July 1st, 2019, home sales of $2 million or more are taxed 1% with a max of 3.9% for home sales of $25 million or more. In the same month, an additional real estate transfer fee also came into effect for home sales valued at $3 million or more.
Recent real estate data shows that this tax hike has taken its toll on NYC real estate sales in the luxury sector, particularly in Manhattan.
NYC Real Estate Market Q3 2019 Reports
According to reports from 3 New York real estate brokerages (Compass, CORE, and Halstead Real Estate), Manhattan home sales dropped in Q3 2019. The year-over-year (YoY) drop is estimated to be between 6% and 16%. Higher-priced real estate took the largest hit, with home sales over $3 million dropping almost 15% YoY and sales over $5 million dropping a whopping 48%, according to CORE’s market data. Q3 2019 saw the lowest number of homes sold above $3 million in 4 years.
Right before the mansion tax took effect in July, sales spiked followed by the aforementioned drop. After which the months of supply in Manhattan shot up to 8.8, a rather large YoY increase from 7.9. With the increase in housing inventory and the new taxes, house prices naturally dropped to an average of $1.6 million. The median sales price fell below $1 million to $999,950, a 17% YoY drop and the lowest it’s been in 4 years. Days on market (DOM) is also up to 152 days, the longest average DOM since 2012.
It would seem that the mansion tax has caused a combination of real estate market trends that marks a buyer’s market in the Manhattan real estate market. Frances Katzen, a local real estate agent, commented that:
It’s a horrible market to be a seller. It’s absolutely fantastic to be a buyer.
Though the high-end luxury real estate market is taking a hit thanks to the mansion tax, buyers are still looking for properties on the affordable end of the price range. Home sales priced below $500,000 increased by 35% last quarter.
Entering the NYC Real Estate Market
If you were looking to enter the NYC real estate market, it would seem that now is a great time to invest here. Start searching for an investment property using Mashvisor’s real estate investment tools and land a great real estate deal in this buyer’s market.
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