Manhattan home sales get short-term lift on mansion tax increase

New York

MANHATTAN home sales perked up in the second quarter from a prolonged slump, as buyers raced to close deals ahead of a July 1 tax increase on higher priced properties.

Sales of co-ops and condos jumped 12.5 per cent in the three months ended June 30, marking the first time in seven quarters that deals climbed from the previous year.

This is according to a report released on Tuesday by appraiser Miller Samuel and brokerage Douglas Elliman Real Estate. The median price of the 2,957 apartments that changed hands set a record at US$1.22 million.

But those gains are probably fleeting. The increase in sales was offset by a surge of listings - to the most since early 2012, the firms said. There were 7,558 apartments on the sales market at the end of June, a figure that's 20 per cent higher than the 10-year quarterly average.

"That's why we can't proclaim that we're in recovery mode," said Jonathan Miller, president of Miller Samuel. "There's still some time in front of us before we're going to see a stronger housing market."

New York state's revised "mansion tax", which took effect on July 1, proved to be a powerful motivator to sell in a market where shoppers have been waiting for prices to fall.

The tax, which previously applied a 1 per cent levy to all homes that sold for more than US$1 million, now charges an increasingly higher rate for homes above US$2 million.

The added closing costs - ranging from 1.25 per cent to 3.9 per cent - motivated sellers to lower prices now, for fear that buyers would demand further reductions after the new tax structure took effect.

Fifty-four per cent of homes that sold in the quarter did so below the asking price, according to Miller Samuel and Douglas Elliman. Another 40 per cent sold at the asking price, though many of those had been reduced earlier, Mr Miller said.

Combined, the number of homes selling at or below the price the seller was seeking was the greatest since the end of 2010.

"At all price points, all markets and locations, buyers want to negotiate. They want to feel like they got a good deal," said Garrett Derderian, managing director of market analysis at brokerage Core.

The discount on homes that closed in the quarter averaged 9 per cent, Core said in its report. Thirty eight per cent of homes that found buyers in the quarter took over 180 days to sell, a sign that owners of lingering properties had become more motivated.

All this wasn't much help to lawyer John Zavitsanos in his effort to persuade his 23-year-old daughter to stay close to home, in Houston.

Anastasia Zavitsanos was seeking to move to New York to pursue an acting career, and her father saw an opportunity to invest in Manhattan real estate.

Working with Brown Harris Stevens broker Ellen Devens, the father and daughter toured several condos on the Upper West Side, looking for something close to the subway that didn't require much renovation and had an old New York feel.

They homed in on a two-bedroom unit that was priced at US$1.995 million. The seller accepted Zavitsanos' first offer of US$1.8 million in cash. Then he insisted he wanted to finance the deal.

The seller eventually agreed to the new terms, and a price of US$1.875 million. The purchase closed a month after entering contract.

"Greek families, if you see pictures of them, they're always wide-angle because everyone always lives together forever," Ms Zavitsanos said.

"We did not want our daughter to move so we negotiated very aggressively. It turns out the seller was more motivated than I was." BLOOMBERG