New York, NY – With the recent passage of Trump’s new tax plan, many buyers sat on the sidelines in December.
However the market is expected to rebound quickly as buyers discover the new changes are minimal and even include some benefits.
According to US News & World Report, the most noteworthy changes include:
- Mortgage interest deduction is reduced from $1M to $750K.
- Deductions on state and local property taxes, known as SALT, can no longer exceed $10K
- The standard deduction for taxpayers is doubled to $12K for individuals and $24K for joint filers.
- Second home mortgage deductions are scrapped altogether, although there are workarounds.
Experts seem to agree that the provision most likely to impact NYC buyers is the cap on SALT deductions. Yet there are plenty of positive signs for the coming year, too. According to the recent City Realty article “NYC Real Estate Experts Offer Their 2018 Predictions,” homebuyers will benefit in several ways, including:
High inventory has begun to drive down prices
We’re already seeing a softening of prices across the board due to increased inventory in both sales and rentals. Sellers will need to compete more aggressively with other sellers as well as renters, who have begun offering more concessions in the way of free month’s rent and paying of the broker’s fee.
Mortgage rates remain low
Considering the complexity of the new tax law, no one expects the fed to make any moves on interest rates for some time, giving homebuyers additional incentive to return to the market now.
‘Affordable luxury’ to attract more buyers
TF Cornerstone predicts that more “suburbanites will make their way to the city, to areas like Downtown Brooklyn and the far West Side,” drawn by luxury amenities and attractive pricing.
Commercial Real Estate to boom with new tax savings
Commercial property owners and investors will benefit greatly from lower property taxes and the ability to use pass-through entities to avoid corporate taxes, which will spur investment and increase demand for rental housing. It’s a big win for commercial property owners and investors.
Long-term effects of the new legislation remain unclear, with some predicting that NYC will absorb the changes and others forecasting a mass exodus to more tax-friendly cities in Florida and Texas. Yet the majority of pundits agree that tax benefits are not the primary reason NYC homebuyers and investors buy in the first place. In fact, several components of the tax bill will actually increase personal deductions of non-real estate sections of their returns.
At the end of the day, this tax reform should have minimal impact on New York City homebuyers, with high demand expected to continue for years to come.