New York’s Mansion Tax Could Explain Blitz of Big-Ticket Sales.
A change in New York state law could be a motivating factor behind a recent flurry of enormous real-estate transactions in Manhattan.
Some of the biggest so far this year: Hedge funder Ken Griffin’s purchase of a roughly $238 million penthouse at 220 Central Park South, Amazon CEO Jeff Bezos’ roughly $80 million buy at 212 Fifth Avenue, seen above, and financier John Griffin’s $77.1 million purchase on the Upper East Side, which set a record for a New York townhouse.
Some agents believe the uptick of luxury purchases could be associated with the expansion of the so-called “mansion tax” and an additional increase in transfer taxes for New York City residential deals. Slated to kick in July 1, they cause buyers to incur a larger one-time tax payment at the time of closing.
The mansion tax will hit the ultrawealthy particularly hard. It increases incrementally with purchase prices of $2 million or more, and caps out at 3.9% for properties sold for $25 million or more.
Ken Griffin, whose deal was in contract for years, would have paid over $9 million in mansion taxes on his purchase, compared with the just over $2 million he was obligated to pay under the current rules, according to real estate attorney Steve Wagner of Wagner Berkow & Brandt. Another roughly $1.5 million in New York state transfer taxes, usually paid by the seller, would also have been due on the transaction, compared with the old taxes of $952,000, Mr. Wagner said.
Representatives for Ken Griffin and John Griffin declined to comment. A spokesman for Mr. Bezos didn’t respond to a request for comment.
The increases will impact both new developments and resales, although some agents said developers may shoulder the additional cost for buyers by dropping prices amid a very slow market.
Real-estate agents said some buyers, including the ultrawealthy, are rushing to close on their purchases before the July deadline. “They didn’t get rich by being dumb,” said luxury agent Frances Katzen of Douglas Elliman. “They’re not going to throw money away if they don’t have to.”
As July 1 approaches, developers of new condos are also advertising their ability to close on deals quickly; closings for co-ops could take longer than a few weeks. “We can close in 48 hours,” said Charlie Attias of the Corcoran Group, who is listing a nearly $30 million penthouse at a new development in West Chelsea.
Still, the rush will likely do little to lift the market out of its slump. The number of Manhattan condo contracts signed at $4 million and above in 2019 is down about 21% compared with the same period in 2018, according to Olshan Realty.
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