Manhattan homebuyers went on a shopping spree in the second quarter, rushing to buy properties before transfer taxes increased.
The median sale price rose to a record $1.2 million, up 11% from a year earlier, as home sales reached 2,957, up from 2,629, according to a report Tuesday by Miller Samuel and Douglas Elliman Real Estate. The sales increase comes after six consecutive quarters of declining transactions, what the report called a “dry spell.”
Buyers were rushing to close before the new state taxes kicked in on July 1. The new levies boost the previous 1% fee on sales of $1 million and above – known as a “mansion tax,” though it applies to all types of homes, not just townhouses – to 1.25% for sales priced above $2 million and 3.9% for a sale of $25 million or more. The transfer tax increases from 0.4% to 0.65%.
While overall sales jumped 13% from a year earlier, the increase was 37% in the $2 million to $5 million price range, the segment bearing the brunt of the mansion-tax increase.
“The introduction of the new mansion and transfer taxes in the next quarter poached future closing volume from the third quarter into the second quarter,” the report states. “The higher level of sales in the second quarter was in stark contrast to the low level of activity last year after the new federal tax law brought expanded uncertainty to the market by capping exemptions on property taxes and SALT,” the report stated, using the acronym for “state and local taxes.”
The tax code approved by Congress in the closing days of 2017 capped SALT at $10,000. That had an outsized impact on some housing markets in states like New York, New Jersey, Connecticut and California that have high-priced real estate coupled with hefty property taxes that support schools and local services.
It cooled sales as wealthy buyers adjusted to the higher cost of owning real estate, said Jonathan Miller, president of Miller Samuel.
“The tax law is forcing buyers and sellers to recalibrate what value is,” Miller said. “The market is beginning to digest the change.”
In the luxury segment of the market, meaning the top 10% of sales measured by price, the number of sales increased by 13% to 297, the report said. The median sale price was $6.2 million, a drop of 6.2% from a year earlier. The days on market dropped to 153 from 184, the report said.