Soaring Manhattan real estate sales could be a mirage
For the first time in a year and a half the sales of Manhattan properties jumped but the good times are not likely to remain same.
As per the report from Miller Samuel and Douglas Elliman, in the second quarter, the real estate sales volume in Manhattan increased by 13%. For an apartment in Manhattan the medium sales cost hit a record of $1.2 million whereas the normal sales cost remained flat at $2.1 million.
Various developers and brokers are cheering for what they say can mark a turnaround for real estate in Manhattan which has seen six instantly quarters of declines. But as per the experts of real estates the genuine reason for the hit in sales is more troubling taxes.
New mansion tax in New York City kicks in on July 1. Several wealthy buyers raced to close deals in the next quarter for avoiding the tax which mainly adds between 0.25% and 4% in taxes to trade of $2 million or above it.
Jeff Bezos CEO of Amazon, who purchased a penthouse in June in the Flatiron neighborhood for approximately $80 million, saved more than $2.5 million in taxes by doing the contract prior to 1 July.
As per the market experts, the tax shifted sales into the second quarter and pull funds from future quarters.
Jonathan Miller, CEO of appraisal firm Miller Samuel said that, “I don’t think these numbers indicates a recovery.” “They were definitely better than what we are familiar to. But I believe the third quarter will surely underperform the second quarter.”
Price points are the one point that sales were driven mostly by the new tax. In the second quarter, the strongest segments of the market were those subject to the new tax. Miller said that the sales of home soared by 37% for between $2 million and $5 million. The homes which are priced between $500,000 and $1 million and wouldn’t be subject to the tax fell by 3%.
On the Manhattan real estate market the broader pressures show no signs of easing. In 7 years, Inventory is the highest. The recent decline in finance rates is doubtful to revive the market as in Manhattan the majority of apartment deals are all cash. Miller said that he thinks the second quarter was moving around the deck chairs.