It Passed: New Tax Laws and Potential Impact on NYC Real Estate

Last week I discussed the potential impact of what was then the “proposed tax plan” on our local NYC real estate market. Today the “Tax Cuts and Jobs Act” has passed both Houses and will be signed into law as early as next week. What this actually means for New York City homeowners and those who make navigation of our already complex real estate market their profession will only be revealed in time. That said, here are my thoughts:

Locally I think we are going to see one of these three possible scenarios and perhaps a mix of the three:

  1. The robust 2017 4th quarter carries into 2018 with interest rates remaining low (many believe that Fed much less likely to raise rates) and buyers take advantage of an increase in inventory and a softening prices.
  2. Inventory spikes from a knee jerk reaction to the new tax laws, prices fall by 10-15% and perhaps more in ultra-lux market, rental prices also spike due to the immediate attractiveness of renting so buyers ultimately choose ownership in the end and take advantage of softening and the remaining tax benefits of ownership.
  3. Worst case scenario for real estate industry: The market stagnates as everyone scurries to consult with accountants and waits to see how things play out with new tax laws. The patience dam will break eventually and I expect a volatile Spring season if not earlier.

There is some good news. Lobbyists were able to keep capital gains ownership requirements at 2 of 5 years as opposed to the proposed 5 of 8 years. One thing is for certain. Accountants are going to be busier than they have ever been as their clients seek answers and direction on just how to best position their assets in the new tax landscape.

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