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Sales of Manhattan properties jumped for the first time in a year and a half, but the good times aren't likely to last.
Real estate sales volume in Manhattan rose 13% in the second quarter, according to a report from Douglas Elliman and Miller Samuel. The median sales price for an apartment in Manhattan hit a record of $1.2 million while the average sales price remained flat at $2.1 million.
Many brokers and developers are cheering for what they say could mark a turnaround for Manhattan real estate, which had seen six straight quarters of declines. But real estate experts say the real reason for the bump in sales is more troubling: taxes.
New York City's new mansion tax kicks in on July 1. Many rich buyers raced to close deals in the second quarter to avoid the tax, which adds between 0.25% and 4% in taxes to sales of $2 million or more. Amazon CEO Jeff Bezos, who bought a penthouse in the Flatiron neighborhood in June for around $80 million, saved over $2.5 million in taxes by doing the deal before July 1.
Market watchers say the tax shifted sales into the second quarter, pulling money from future quarters.
"I don't think these numbers signal a recovery," said Jonathan Miller, CEO of appraisal firm Miller Samuel. "They were certainly better than what we are accustomed to. But I think the third quarter will underperform the second quarter."
One sign that sales were driven largely by the new tax is the price points. The strongest segments of the market in the second quarter were those subject to the new tax. Sales of homes for between $2 million and $5 million soared by 37%. Meanwhile, homes priced between $500,000 and $1 million, which wouldn't be subject to the tax, fell by 3%, Miller said.
The broader pressures on the Manhattan real estate market show no signs of easing. An oversupply of new condos, a lack of foreign buyers and the adverse effects of the new federal tax law are likely to continue to weigh on sales and prices. Inventory is the highest in seven years. Even the recent decline in mortgage rates is unlikely to revive the market, since the majority of apartment deals in Manhattan are all cash.
"I think the second quarter was just moving around the deck chairs," Miller said.