Future property taxes and RE prices

Increased maintenance costs will absolutely have a negative effect on the long term value and pricing of apartments.

There are many tax inequalities in the NYC system. I have a tax abatement on my condo for 25 years...I pay a little over $3.50 month in property tax (not a typo) for a large 1 bedroom. Many argue what happens when the abatement ends...but #1, that is more than 20 years away, and #2 the unabated amount is just $28/month (again not a typo). Even when you adjust for inflation, it will still be far cheaper than comparables.

Of course I understand that there is political risk of a revamped tax policy, but that is always easier said than done.

Keep in mind with all of the development that has occured in the city recently it has helped create revenue sources from property taxes where there has been little to none (think all the fringe neighborhoods that have transformed). So unless there is a mass departure from the city, it sure helps the equation. I am not in any way saying that these new condo's offset the revenue from Wall Street firms, but every little bit helps.

thanks semerun! how does your tax abatement work? as a % of the unabated? (12.5% in your case) do you know whether old buildings have tax abatements currently? the building where i rent has one cause it was built recently in one of the fringe neighborhoods (harlem). it will take the city a couple of decades to get $ from most of where i'm now.

but the city did get $ from transactions, which as i understand is around 2% of total value for sellers (same for buyers??? how much goes to the ny state???) and another 2% of mortgage originations. anybody knows how these transaction taxes work? my understanding of them is very vague as you can see.

this is the part of the property taxes (taxes on transactions) that will shock the coffers as transaction volume and prices go down.

A large chunk of the most expensive older co-ops pay *waaaay* too low in taxes. They are assessed relative to rental buildings in the area, which can often have many stabilized apartments, and they are factored in.

Trump on CPS fought for a ridiculously low valuation, and won...

wow! thanks nyc10022 for the info.

i've read a paper regarding how irrational the assessed values are. they show a huge preference towards long term residents (town houses having tiny assessed values) in detriment to condo rentals.

it should be expected politically-wise given that long term residents vote much more than those that live on condo rentals (that are more biased toward recently arrived professional youngsters that don't vote.)

yeah, its one of those long running "entitlements", like rich folk in stabilized apartments (I like how you can make a billion and not lose your rent stab apartment as long as TOO good a deal - what fing logic is that?). There are probably a bunch of the politicians themselves in these deals, not to mention their cronies.

Plus, a lot of senior citizens, I bet.

Imagine if a politician tried to "increase everyone'e property taxes 300%!". Of course, we're talking about simply balancing it, but who cares in the media.

Education and housing - the third and fourth rails of NYC politics.

"Plus, a lot of senior citizens, I bet."

fed and local pensions, ss (and the rest of typical pension income, annuities and ira distributions below 20k) don't get taxed at the state nor city level. that is a possible new source of funds if it's change. of course, i'm young... lol so i wouldn't really mind if done.

Admin, I honestly don't know how the city arrived at the 12.5% ratio. There was a fee that the developer paid to the city for the abatement, which the developer charged back to the buyers in the closing costs. New buildings can apply for a 421-a abatement if they fall into the right zone. Older buildings that are rehabilitated I believe can apply for a J-51 abatement. I don't know much about the J-51, but I am sure there are others on this board that can elaborate.

My condo is located on a property that sat vacant for decades (in West Harlem)- the city wasn't collecting any revenues on it for all that time. Yes you are correct, if transactions dry up then the city and state see a lot less revenues- because there are huge taxes associated with buying/selling real estate in NY State and NYC. I don't know how that is divided up though.

Property taxes are definitely a problem. But an even biger problem is income taxes. I fully expect tht I have seen the lowest marginal tax rates for personal income and the lowest capital gains taxes that I will ever see in my life time.

Incomes particularly in New York City are going down. And tax rates are going up. Up a lot more if Obama wins a little more if its Mccain. But next year incomes in new york are going to be lower and new yorkers will be taking home less of what they earn. People will have less money to spend on housing. Period. And this will last for the next decade. The impact on apartment prices will be devastating and it will be prolonged.

If you buy an apartment today be prepared for a 30-40% drop in value in the next 2-3 years and then a decade of slow appreciation that may take you back to your original purchase price by 2022. And that's only if interest rates stay low. With the pols in DC spending money like drunken sailors the Hank Paulson will be selling US Treasuries till the cows come home. That has the potential to move interest rates dramatically higher in which case apartment prices free fall to levels last seen in the early 1990s.

Wake up. We are in a new world. Nancy Pelosi and Barney Frank are now signing your pay check. They will decide decide how nuch you get paid. Barack Obama will then decide how much of that paycheck you get to keep. They are the poster pols for renters because they are intent on making things affordable for everyone. This is great for those who have no skin in the game and for those who do not own anything. This is great if you have not managed to be productive so far in your life. This is grave news if you have been and are productive in life and this is a death knell if you own real estate, or are a landlord.

"And this will last for the next decade... And that's only if interest rates stay low."

i agree with both. this is not a 2 year thing. it has all the signs (to me) of a mayor long term decline of asset prices (like Japan) values, at least in real terms. rates are only going to go higher as deficits soar and the pool of current deficit financiers dries out (cannot count on Russia buying usa debt for a long time i guess, china will buy much less if at all given that exports to usa will go down, same goes for the middle easst).

income tax rates for nys and nyc stop going up at $60k, which is a joke. pensions are not taxed, another joke.

what is going on is great for young people that are starting though. expensive housing, expensive health care and education, entitlement tsunami... the old in usa think that the young are super heroes. only super heroes could successfully pick up those assets at such valuations, pay for entitlements while having decreasing disposable income. it simply was not realistic.