It’s often said that when the U.S. economy gets sick, the whole world catches a cold. This phenomenon is increasingly applicable to the ties that bind New York City, one of the world’s most dynamic real estate markets, and that of Miami, one of the fastest-growing. Now that federal tax laws are encouraging New Yorkers to flee south, Miami’s and New York City’s property markets are linked more closely than ever. The implementation of additional taxes at the state and local levels may only add to the exodus, presenting new opportunities for Miami real estate agents.
It’s still not polite to gawk at the wealth on display throughout New York’s real estate scene, but a few recent sales turned heads even among locals. Early this year, hedge fund billionaire Ken Griffin set a new record for the priciest residential real estate purchase on U.S. soil: $238 million for a penthouse at 220 Central Park South. The world’s wealthiest person, Jeff Bezos, soon followed, closing an $80 million sale for three adjacent condos earlier this month. Just a day earlier, the city’s record for the highest-priced townhouse was also shattered with a $77.1 million deal by billionaire John Griffin.
Some brokers speculated these and other high-value deals did not just happen to coincide around the same time. A few months ago, word was spreading that New York state and local officials were planning to increase real estate taxes on high-value properties, either through increasing its longstanding “mansion tax” or fees paid to transfer title ownership. Once these new laws passed with an effective date of July 1, the pressure was on for many brokers, and not just in New York City.
“There’s no doubt about it, people are talking,” said Josh Dotoli, a broker with Compass and leader of the Josh Dotoli Group based in Fort Lauderdale. “Anyone who was considering putting property on the market is reconsidering their pricing strategy.”
Dotoli said this was the case in the Miami area as well as New York, a symbol of the strong ties between the two cities and their property markets. Dotoli estimated that around 25 percent of his business these days involves clients from the Northeast, particularly New York, a number that’s only risen as new property tax bills arrive in the mailbox.
However, Dotoli speculated that New York’s new mansion tax might slow down transactions in South Florida in the short-term. That’s because the higher taxes will only exacerbate a demand slump that he and other brokers have been seeing across the Tri-State area. Particularly in the high-end home market, listing inventory has grown significantly over the last year while prices have flatlined or even fallen.
“With more people leaving the Northeast, you’re creating more inventory but with less buyer demand,” Dotoli said. “More inventory leads to more days on market and lower sales prices, which are all pretty adverse results if you’re looking to sell and move.”
But Dotoli said he is already seeing a jump in the number of prospects from New York who will be ready to transact within the next six to 12 months as they finally sell their current homes and find new ones in South Florida. He and other brokers are also still closing big listings with buyers from other high-tax states like California.
“We’re certainly going to see a bump in the high-end market” as a result of New York’s new taxes as well as the continued pressure of higher costs in many other states. “If you move here and declare residency, you could see an instant savings of 10 percent from taxes alone.”