Sentiment can’t get much worse for New York City’s high-end home sellers than it was in 2019—that seems to be the feeling among the city’s real estate professionals.
For nearly two years, the city’s housing market has felt the fallout from a handful of different economic forces, including too much luxury condo construction and the 2018 federal tax reform, which reduced key tax write-offs that hit residents of pricey, high-tax areas like New York City the hardest. But before New Yorkers could digest either of those issues, the state threw a wrench into the city’s high-end housing market this year by raising property transfer taxes on homes over $2 million.
“It was a case of death by 1,000 cuts,” said Shaun Osher, CEO of New York-based CORE Real Estate. Now, he’s looking to 2020 with “guarded optimism,” he said.
Luxury home prices will likely remain flat or decline slightly as buyers and sellers continue to adjust to these various tax changes, experts said, but there are reasons to believe activity will rise. Affluent homebuyers will start to come out of the woodwork as they find rising luxury rents less appealing and sellers get even more negotiable on price.
“We’ve already seen buyers who’ve been on the sidelines for two years tread back into the market,” Mr. Osher said.
The top of the market remains the most vulnerable to further price declines in 2020 as demand fails to keep up with a glut of new luxury condo development.
Big-ticket deals have taken a particular hit since July 1, when new transfer taxes slapped home sales of $25 million or more with a 4.55% tax bill—that comes to well over $1 million in taxes, a cost of doing business that will continue to turn off affluent buyers.
Michael Rossi, CEO at Elegran Real Estate, said despite major stock indices hitting new records in recent weeks, continued uncertainty over a U.S.-China trade deal and a general election could curb sales in Manhattan’s luxury market.
“Until the end of the trade war with China, we don’t foresee the $5 million-to-$10 million segment recovering as quickly,” Mr. Rossi said in prepared comments. “We believe 2020 will be a buyer’s market and offer increased opportunities for savvy buyers to enter the NYC residential market at lower resale and new construction price points.”