We all know about the iron-clad certainty of death and taxes. Here’s another sure thing: rich people will race to beat a deadline when taxes on luxury goods are about to go up.
Case in point: New York City’s luxury real estate market experienced its busiest week in two years leading up to the July 1 increases in the so-called “mansion” tax and the real estate transfer tax. The Wall Street Journal reports that there were 14 sales in Manhattan last week that closed for $10 million or more, the most in any seven-day period in the past two years.
Despite the late-June surge, apartment sales in Manhattan still lagged, down 2.3 percent compared to a year earlier, according to the Journal. Inventory is also up, and the number of luxury contracts signed fell between April and June.
The mansion tax will cost homebuyers paying at least $1 million an extra 1 percent on the purchase price. The rate grows incrementally and tops out at 3.9 percent for homes selling for $25 million or more. The transfer tax starts at 1.4 percent for homes costing less than $500,000 and peaks at a bit more than 2 percent for dwellings reaching the $25 million mark.
Spurred in part by Ken Griffin’s record-smashing purchase of a $238 million condo penthouse at 220 Central Park South – and an ensuing surge in “tax-the-rich” sentiment – the General Assembly had considered levying a so-called pied-a-terre tax on the second homes of wealthy buyers who are largely absent from the city, a proposal that met with stiff resistance from the real-estate industry. Instead, the state legislature increased the mansion and transfer taxes in the state budget passed in April to raise money for New York City’s stressed mass transit system. As Crain's reported following the vote, brokers say the measures will increase headwinds in an already slowing luxury market.
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