Increase in both transfer & mansion taxes?

Thank you. Do you have a link to actual legislation? Wondering if the increase mansion tax is on the incremental amount or the full amount once your cross the threshold.

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries. Winston Churchill

300 I had the same question. It should work like our income tax structure.
I think incremental, 1% on the first $2mm, 1.25%, on the $2mm to $3mm portion, etc. at least puts a little vaseline on it.

Now that I think about it, probably not. The original 1% mansion tax on over $1mm proeprties doesnt abate the first $999,999. Thats what happens when you live in a one party no matter what state. When the time comes for me to pay this tax, it will be my last NYC one. Will likely bring my independent vote to a purple state like Florida

Per The Real Deal calculator, it's on the full amount. So instead of one kink at $1,000,000, we get 6!

Unfortunately, it is not on the incremental amount.

One party state is indeed an issue in the current political environment when it comes to taxes. We do need more independents.

Enjoy Florida. Unfortunately, we plan to be here for a while. So no escape from socialism and ever increasing taxes in New York.

This has to push more marginal sellers into renting out / becoming landlords, no? Exactly how much worse was the annual pied-a-terre tax supposed to be for real estate?

300, we see the politics somewhat differently -- I agree that many New Yorkers are being dumped on ... but you think it's because the city/state are such big spenders ("socialism"), and I think it's because Albany/the City refuse to properly tax rich people!

In the neighborhoods I sell in, a $2 million apartment is not exactly a mansion ... why increase the taxes on those upper-middle-class family residences? Because, um, there was no political will to pass the pied-a-terre tax. Or to raise income taxes on the richest New Yorkers to fund universal pre-K. Heaven forfend the upper class actually pay their fair share.

ali r.

Socialist has just become a pejorative term for a liberal Democrat ;)

Ali, What is per person state spending in NY vs FL vs Texas?

Is spending per Student in Bronx much lower than say PS41 is it the parental involvement, education and responsibility which makes the difference? Are poor Chinese parents getting more resources from the city for the Asian kids to test better for Stuy school than non Asians students with equally poor parents?

And how you define “fair” share? How progressive do the taxes need to be? There is no limit to the fairness continuing to increase taxes in NYC residents. Look at what happened in CT with the same mindset. Rich left!!

And why does building the subway cost multiple times equally crowded and expensive cities? AOC like socialists’ main focus is jealously from the rich not efficient use of the money raised and how it is spent.

Keith,

Liberal on social issues like gay marriage or liberal on taking other people’s money with increased propensity? First one is great and makes for a fairer and freer society. But second one is socialist.

“Socialist has just become a pejorative term for a liberal Democrat ;)”

Treading VERY carefully while talking about public schools so that it doesn't become a Fair Housing issue, the difference between a "poor" school and a "rich" school is that rich schools raise more than $1,000 per pupil through their PTAs (which can afford to be active since the parents have the privilege of work flexibility).

The reason certain racial groups test better than other racial groups is that 1) there is a crazy culture of test prep in certain communities and not in others and 2) the test is racist. (Mr. Front Porch is an alumnus of one of these specialized high schools, so he and his friend group talk about this a lot).

More importantly, the fact that certain groups can't test into NYC SHS shows the weakness of the middle schools that these groups collectively attend, and any system that allows large swaths of twelve year olds to fail instead of educating them needs to be fixed, stat. If that wish makes me a socialist, I'll plead guilty.

I think it's hysterical that the 3 Real Estate Brokers in this thread are the "socialists."

30, Which 3?

Ali,
1. Do you realize that the mansion and transfer tax increase is going to MTA which builds new infrastructure at 4 time the cost of other expensive cities? It is noting to do with education.

2. What is the $ increase in NYC budget and what percentage of that went to education?
3. Is there a measurable improvement due to extra $s towards education?

Re 2, increase in budget over the last 10 years.

AFAIK the increase in NYC budget under DeBlasio is $79 billion to $93 billion.

30, I have different numbers from fiscal 2014 (last budget under Bloomberg) to FY 2019 but will wait first for confirmation from Ali on point 1 as it directly relates to new taxes this thread is about.

First, an older point: I would also expect NYC per-pupil spending to be higher than in places, because our real estate costs are higher, and therefore our cost of living is higher, and therefore we have to pay our teachers more. If textbooks and pencils cost the same amount of money in Texas as they do here, but we have to pay an NYC teacher more than a Dallas teacher so that the NYC teacher can afford to take the job in NYC, then our costs, amortized per pupil, are going to be higher. It doesn't mean that we're "wasting" our money or "serving our students less well."

To your more current points, I haven't seen the FY 2019-2020 budget yet. It's being reported pretty piecemeal. For those who care, 2018-2019 highlights are here: https://www.schools.nyc.gov/about-us/funding/funding-our-schools

City Council 2018-2019 budget report notes that education is 28% of the city's budget spending. That serves 1.1 million pupils (an increase of around 4% from the Bloomberg years) and pays for 133,000 staff, so it's a big industry. Of course I would expect spending to be higher than during the Great Recession, both because of gains from whatever economic boom we're having and because the education mandate has increased to include four-year-olds ("universal Pre-K") and three-year-olds ("universal 3-K").

I also suspect that the amount of Federal aid coming into a blue city from this President has declined, but I haven't researched that yet... will try to look it up in a bit.

Ali, While you research the use of new mansion and transfer tax, I can tell you that I would not have any issue with tax increase if every single $ of tax increase went to education including more well performing charter schools but only something in the range of 28 cents does.

Look under MTA funding: zero for education.
https://www.governor.ny.gov/news/governor-cuomo-and-legislative-leaders-announce-agreement-fy-2020-budget

While I am otherwise staying far away from this debate, I take great offense to the repeated mantra about who pays a "fair share" of the tax burden. Putting aside the sort of taxes being discussed here -- property, transfer taxes, etc. that are even more disproportionately levied on the "rich" who by and large don't use public schools (or, like me, have no children) -- to "share" means to divide up, and to do so "fairly" means to divide reasonably. 44% of Americans pay no federal income tax, and the infamous "one percenters," pay 38% of all income tax. That means a little over 3 million Americans pay $570 billion of the $1,500 billion in total taxes paid by 330 million people. You are right that the burden is not divided fairly; but you are looking at the wrong end of the curve. Unremarkably, it is always those paying the least taxes and using the most services who think someone else should pay more.

The other thing noted above about wildly different tax burdens is unfortunately a byproduct of our state and local taxation system. If you look at the rest of the world, the cities are subsidized by the rest of the country, not the other way around. If NYC kept all of the corporate, income, sales, etc. taxes generated here, we would be quite rich.

Thank you for clarifying. I was actually trying to stay away from this argument and merely show that education is getting nothing from the tax increase in question. Just like “affordable housing” subsided by real estate tax breaks in new developments is taking away $s which could have gone to education for social welfare.

“Unremarkably, it is always those paying the least taxes and using the most services who think someone else should pay more.”

How about our retarded property tax system. The more tax you pay, the more it figures into your coop building's RPIE (real property and Income) report which uses "gross" income or "gross" comparable rent.
So the higher the tax, the higher the gross "rent." the higher the rent, the higher next years tax goes.
Meanwhile schools receive around $3 billion dollars from Lotto each year.
And congestion pricing. How can you look at anyone with a straight face who lives below 60th st and has a car and have them pay congestion pricing!? Especially if that person leaves a car in the zone overnight and removes it during rush business days traveling outside the city.

I apologize for trying to get back to the reason for my post in the first place:
Is there any argument that prices won't fall by at least the increases in these taxes (i.e. there's no way people will pay MORE due to these taxes so they will end up getting deducted from proceeds one way or another), and
There is a good chance the impact on prices will be multiplied since small changes in proceeds tend to end up as large decreases/increases to profit/loss, and even more on leveraged assets (i.e. levers swing both ways.

Makes logical sense for the prices to go down by the increased tax. So >$25mm down 3 percent from some unknown market price.

And more stress with negotiations that are near the benchmarks of the tiers.

and the thread should have the details posted

$1,000,000 – $1,999,999 1.00%
$2,000,000 – $2,999,999 1.25%
$3,000,000 – $4,999,999 1.50%
$5,000,000 – $9,999,999 2.25%
$10,000,000 – $14,999,999 3.25%
$15,000,000 – $19,999,999 3.50%
$20,000,000 – $24,999,999 3.75%
$25,000,000 or more 3.90%

And since both father and son are the arbiters of mansion tax 1.0 and 2.0, it should be named the Cuomo Tax. And its likely to last longer the bridge so he should be happy with that :)

My god did I make consecutive posts starting with "And?" Sorry guys.

“Unremarkably, it is always those paying the least taxes and using the most services who think someone else should pay more.”

-- you just accurately described the U.S. Senate

I agree with you nyc_sport that the City should keep more of the taxes we generate... but sometimes we are on the benefit side of that equation. Let's not forget we here in NYC had a relative easy time, collectively, during the Great Recession --- because of TARP, which was a huge transfer of funds into the financial industry.

"because of TARP, which was a huge transfer of funds into the financial industry."

I'm pretty sure I've made this point before:
Because of the bailout Real Estate in NY rebounded extremely rapidly and sharply. There are many places in this country where Real Estate prices still have not reached back up to pre 2008 prices.

agree with you 30yrs - most of the country is not back to pre 2008 prices, and in NYC, we are falling to pre 2008 pricing and below.

I suspect that the new transfer taxes will create a short term flurry of activity as buyers/sellers seek to get deals done before the new tax laws come into effect. I further predict that people will inaccurately read that data as a market recovery due to the increased activity during that period...

https://www.ft.com/content/72255e50-5c7c-11e9-9dde-7aedca0a081a

i think the increased tax is for the city to book expensive hotels up to $800/night for homeless, and building luxury homeless shelters

TeamM - totally true, people think the market is rebounding due to people trying to close before July 1....

30 - you are right, prices will get pushed down greater than the increase in tax

nicesmile - For what it's worth, there was not the activity spike that I expected in the luxury market (as defined by the Olshan report). This could mean that things would have been even slower if not for the tax change or it could mean that this segment of the market still isn't ready to come to terms with the real prices where things will transact.

By way of example, in the last 10 weeks, it looks like 224 properties >$4mm have gone into contract in Manhattan. Over a similar 10 week period in 2018, 258 properties >$4mm when into contract in Manhattan. As I understand it, 2018 was also a slow year in this segment, so it would be a real stretch to say that things have picked up in this segment in 2019.

I don't know what the catalyst will ultimately be to increase transaction volume in the secondary market. It seems like a lot of sellers in this segment have the financial stability to hold out indefinitely, and I think buyers in this segment have shown the discipline to wait, so until there's sufficient data built up that supports a reorientation of mindsets, it seems that transaction volumes will sputter.

258 vs 224 is not that must different, within random fluctuation range

The numbers shows luxury market is still very active

Anton - what would you consider to be an unusual fluctuation? Depending on what you consider the numerator, it's about a 15% downward fluctuation over a 10 week period of what I believe to be a traditionally active selling season, during which there is a tax benefit to selling fast and it is contrasted against a starting point (i.e., 258 in 2018) that I believe people saw as being relatively weak.

It might be fair to say that one should look back to the date the actual tax change was first discussed for the appropriate comparison, but I think the point still holds that the activity is lower notwithstanding a potential transaction catalyst.

When will the Manhattan market:

a) reach the new normal bottom? It seems like there is space to drive prices lower with RE taxes on the rise, new increase in taxes over 2m, the ongoing SALT limit, increasing inventory of properties available (resale and new development), flight to Brooklyn/ lower taxes states, and recession on the horizon. Seems like we have another 2 to 3 years of price decline in store for the Manhattan market.

B) when will the market rebound, if ever? Or are these new lower prices the new normal for 5+ years and will there be continued downward pressure on pricing?

It looks as if the Manhattan RE market melted up after 2002 to 2006/7, and from cnbc earlier this week they showed a graph that the Manhattan RE market is down 20 percent from the 2006 highs. Is this recalibration just due and a reasonable adjustment?

Well, nicesmile, if any of the brokers regularly on here (and I'm one) were a whiz at projecting asset prices, we wouldn't be brokers. We'd be retired.

That said, I think the "consensus" view is flat to down for the near term. I think you really do have to separate the market into price and neighborhood segments, however; in the segments I work in, there is no way that the market is 20% off peak. UWS 2/2s, for example, are running about 10% off (if I had to pick a number to make a GIANT generalization).

Is the recalibration a reasonable adjustment? In my view yes. A very strong factor in that is the SALT cap; another factor is the relentless march of property taxes, which are generally outrunning wages in this segment. Brownstone Brooklyn, I think, has crested because after years of being shockingly undertaxed, taxes are starting to normalize in some segments. (Also, demographically, consumers are starting to notice that as they moved into certain neighborhoods, available school slots did not keep pace).

What's a recession going to do? It depends on how hard it hits NYC jobs, honestly.

I'm more "bullish" than many on this board, so I think we're looking at flattish for awhile, though we are looking at crazily low interest rates (lowest in two years, roughly) so those may be supporting the market.

I also think politics are a giant X factor, and nobody can predict when and where those cards fall.

ali r.
{upstairs realty}

How about the upcoming QE?

There is a lot of uncertainty in the markets with trade wars, end of 10 year bull run, dysfunction in the current administration, capital controls for foreign buyers, tax impacts, etc. Uncertainty can cause unmotivated buyers to adopt a wait and see strategy which in turn can create more downward price pressure with all of the new inventory coming online.

I don't foresee this environment of uncertainty changing until after the 2020 election.

nicesmile,

a) No time soon,
b) In my view the thing which could have saved the market was interest rates going back down. But we got those, and it didn't happen. The economy is good, interest rates are low, the stock market is fine, etc. And people still aren't buying! That means it's buyer sentiment. For the better part of a decade buyer sentiment drove the market on the way up, and it's what is going to drive it on the way down. The irrationally exuberant buyers are pretty much gone, so the deals being done at the old prices are over. What we have had for the past year are the buyers who were sitting on the sidelines waiting for prices to come down 5% to 10%. But there are more sellers wanting to sell than those buyers can accommodate. Once that buyer pool is used up we'll get to the buyer pool which was waiting for prices to come down 10% to 20% and so on.
Buyer sentiment tends to have tremendous inertia - so on the way up people keep buying way past the point it makes economic sense to. But then on the way down, it doesn't just take prices making sense again to change it back - it takes prices being so low that you have to be an idiot not to buy. And just about every indicator is showing people have flipped back to being willing to rent unless they have a good reason to buy.
Buyers, sellers and brokers can't change interest rates, can't change the economy, can't change employment, can't,can't, can't. The only thing they have control over is prices. And once buyer sentiment has gone from "you have to buy!" to "it's crazy to buy!" it almost always takes more than small 5% to 10% price adjustments to change their minds. It takes a combination of large rent increases and large price decreases to prove to people that buying is the way to go. Right now, rent vs buy comparisons come out with the verdict that the person performing them wanted before they did the comparison. So if someone wants to buy they can use it to prove to themselves it's the right choice, and if someone doesn't want to buy they can use it to prove to themselves that is the right decision. But they aren't changing anyone's minds.
To flip the market back, the numbers have to move to the point where they definitively show to anyone that buying is the better choice. And a big part of that is some kind of definitive proof that prices have hit bottom and are going back up. I do not think there is any evidence that we are anywhere near that point yet.

Reading this week's Olshan report, it is clear that at least some of the activity was prompted by the tax changes.

"Seven of these properties, all condos sold by developers, went to contract and closed in the same week, thus avoiding the increases in the new New York State Mansion Tax that went into effect today (July 1). " https://www.olshan.com/marketreport.php

It will be interesting to see what happens in the coming months.

It will also be interesting to see what kind of haircuts these developers took to get these deals done once the numbers are recorded.

And even with this push, as far as I can tell luxury sales for June were still down vs last year. You are correct that the next month or two of sales without the possibility of an added incentive will be telling.

432 Park is 25 percent which is not far from other discounts offered in the past. Sales closed already.

Bezos was 15 percent from the last ask - not too far from other unit discount recently despite lifting 3 units.

Let's take a look at a part of the market which is still supposed to be doing fine (y'all can play along at home on this game):
Do a Streeteasy search for 2 BR coops in Chelsea between $1,500,000 and $2,500,000 looking only at those sold or off the market and sort by recently update.

Of the first 2 pages (which it seems represents 2019 activity) 8 are sold and 12 have been taken off the market. Everyone who thinks this represents a healthy market please raise your hands?

40% sold, this is very solid

Anton - I like your enthusiasm. I would have thought that only 40% sold (v. 60% removing themselves from the market) would be pretty poor data, but I don't have a good sense of the historical norms. Is it typical that only 40% of sellers can find a buyer within some reasonable period before they abandon the market? I would that thought that it would be >90% that would find buyers.

TeamM, with historic peak price, if >90% listings find buyers so easy, that's not a flat market but a bubble