Tax Overhaul May Mean Lower Prices for Manhattan HomebuyersBy
Bill limits mortgage-interest deductions to $750,000 of debt
Home hunters will want discounts for higher carrying costs
The U.S. tax overhaul sent Wednesday to President Donald Trump for his signature is likely to push down home prices in high-cost markets such as Manhattan and Westchester County to the north as buyers demand discounts to cover higher carrying costs, said Jonathan Miller, president of appraiser Miller Samuel Inc.
“You have so much you can afford a month,” Miller said. “Now you have larger costs taking up that amount you can afford. So there will be downward pressure on prices until there’s equilibrium.”
The bill makes homeownership more expensive in New York, for example, by limiting deductions of interest to new mortgages of up to $750,000 and capping deductions of state and local taxes at $10,000. In Manhattan, the average price of an apartment in the third quarter was $2 million, according to Miller Samuel. Deals have been accelerating ahead of the expected passage of the measure, Miller said. Buyers would have needed to enter into a contract before Dec. 15 and close on the purchase before Jan. 1 to avoid falling under the new rules. It’s not clear when Trump will sign the legislation.
At Corcoran Group, broker Brian Meier put 18 Manhattan apartments into contract in November. He even bought a place himself.
“You can definitely get a better deal today on property,” he said in an interview earlier this month, when the bill was still being worked on.
Well-heeled Manhattanites who pay cash, and whose top income tax rate will be lowered to 37 percent from 39.6 percent, should see an added incentive to buy a home now, said Darren Sukenik, a broker with Douglas Elliman Real Estate who specializes in high-end residences downtown. With Manhattan luxury prices coming down this year, the tax break should offer his luxury clients the final jolt they need to commit a high-end home purchase.
“I don’t want to overemphasize their enthusiasm,” he said. “But basically they’re dancing in the streets.”
Robert Dankner, president of Prime Manhattan Residential, predicted that the effects of the tax overhaul will be minimal for many New York homebuyers. For the wealthiest, any increase in state and local tax burdens are more than offset by changes to the alternative minimum tax. Even for the slightly less rich -- someone stretching to buy a $3 million apartment, for example -- the bill means maybe $10,000 more that can’t be deducted.
“The effect here is going to be a non-event,” he said. “New York people are here because they have to be -- that’s just the way it is.”
— With assistance by Prashant Gopal