Just when you thought the sales of luxury condos had run out of gas, a flurry of high-dollar deals has hit, including hedge funder Ken Griffin’s purchase of a $238 million penthouse at 220 Central Park South, Amazon CEO Jeff Bezos’ roughly $80 million buy at 212 Fifth Avenue, and financier John Griffin’s $77 million purchase on the Upper East Side, which set a record for a New York townhouse.
Why the sudden flurry? Because the tax laws are changing on July 1, the Wall Street Journal reports.
Both a new "mansion tax" and an additional tax on real estate transfers take effect July 1. The mansion tax costs home-buyers 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. The new taxes were passed by the General Assembly in April to raise revenue to fix New York City’s battered subway system.
July 1 looms large in the minds of rich apartment hunters. If Ken Griffin had bought his aerie after July 1, he would have paid over $9 million in mansion taxes, compared with the just over $2 million he was obligated to pay under the current rules. Another roughly $1.5 million in New York state transfer taxes, usually paid by the seller, would also have been due on the transaction, compared with the old taxes of $952,000. (Ken Griffin purchased his home before the new taxes were proposed and enacted.) After July 1, Bezos would have paid roughly $3 million in mansion taxes, compared to about $800,000 currently.
Still, the rush to beat the tax man will likely do little to lift the market out of its slump. The number of Manhattan condo contracts signed at $4 million and above in 2019 is down about 21 percent compared with the same period in 2018, according to Olshan Realty.
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