The New Mansion Tax

The 1st quarter of 2019 was a big dud.  Though prices increased on average in the first quarter, it was “solely due to a jump in luxury new development closings, including a record-setting $240 million sale. The average price for just resale apartments was 3% lower than a year ago, as price adjustments continue at a very slow pace. Activity remained sluggish, with the number of sales 7% lower than the timid pace of 2018’s first quarter.”

Our quarterly report continues: “The largest price declines over the past year were in three-bedroom and larger apartments, which have by far the highest levels of supply. The average resale price fell 12% for co-ops, and 6% for condos with three or more bedrooms. The spread between selling and last asking price reached its highest level in almost nine years, as sellers continue to adjust to market conditions.”

Now the juicy part: “After a slow start to 2019, the Manhattan market will face the added challenge of transfer tax increases included in the New York State budget. These changes, which take effect July 1st, will raise mansion taxes on sales for $2 million or more, and raise the transfer tax for residential sales for $3 million or more. This may lead to a rush of closings before July 1st, but will put further downward pressure on prices, particularly for luxury apartments.”

If you want to take a look at our full report, it can be found here:


There were two taxes to note.  One is an added 0.25% tax on sellers, called a Transfer tax.  This adds 0.25% to what is currently 1.825%, a burden on the seller.   This only applies to homes over $3mm.

What may be perceived as a bit more impactful are the New “Mansion Tax” Rates:  Instead of a 1% tax on sales of $1 million or more, the new rate is based on the specific sales price above $1mm:

Between $1-2mm, the rate remains 1.00%.  Then, between $2-3mm, it moves to $1.25%.  $3-5mm it moves to 1.5mm.

Where it gets a little irritating is in the $5-10mm range (actually 9.99mm), where it jumps to 2.25%.  $10-15mm it goes to 3.25%.  $15-$20mm it moves to 3.5%.  $20-25mm it moves to 3.75%.  And anything over $25mm is taxed at 3.9%.  These are fairly shocking levels.

It’s important to know that these changes take effect for closings on or after July 1, 2019, except for sales where the contract was signed on or before April 1, 2019 (with some kind of delayed closing – as with new development).


My thoughts:

oh, snap! No one saw that mansion tax coming!

Our economist is too pessimistic, except at the ultra high-end.  But the mansion tax did catch people a bit by surprise.  And it could have been much, much worse.

Under $3mm, this is a blip.  People will be annoyed, but it won’t make a difference.  People will start to notice the costs as prices move to $5mm.  And over $5mm, it will cause sellers some pain.  That said, since mortgage rates have dropped 0.5% over the last couple of months, the impact of this added tax is a one-time pain, while carrying costs have come down.

It will cause more consternation than actual disruption in sales.  Sellers north of $10mm will probably capitulate to the tune of 2-3%, which is part of a downward trend at that price point.

Overall, though, the bigger driver is that we are out of the woods with income taxes.  People know what they owe, and on the whole it’s a little higher.  It may be MUCH higher in parts, but buyers know how much higher now.  Anything that ends the unknown is going to be helpful.  It would be helpful to know a lot of things, including where the stock market is going to go.  But we live every day with a certain amount of unknown, with which we are comfortable.  Now that the tax uncertainty is out of the way, buyers and sellers will find their way towards managing it.

And, further, given the 2+ year drop in prices, buyers see a lot more value than they have in years.  Perhaps new development will have a bit more inventory to wade through and price adjusting to consider, but they can do that- it’s all about business.  Banks will understand the “haircut” that developments will have to take to get their apartments sold.  Resale units are already moving and will continue to do so.

anything over $1mm could be a “mansion in new york.” even this.

I’m actually very optimistic about the market overall, which I spoke about in my video.  This is a more detailed explanation of the video.  I hope it’s helpful!  In a market with so much noise, I aim to be a voice of clarity.  Have a great month! -Scott