Not only has New York's real estate hit a 6-year-low in the fourth quarter but when the new tax rules take effect, it is very likely to drop even lower.
A report from Douglas Elliman Real Estate and Miller Samuel, the total sales volume dropped 12% compared with the fourth quarter last year. This is the lowest in 6 years.
Brokers agree that this is a response to the uncertainty generated by the Republican tax plan. Buyers are holding off until the new rules of the game become clear. There has been an average price reduction in Manhattan of $2 million. This is the first time in over two years.
"There will be an impact on prices and sales," Jonathan Miller, president and CEO of Miller Samuel said to CNBC. "But it may take up to a year and a half to two years to see the full impact."
The biggest impact of the fall is seen in the high-end of the Manhattan market. The luxury apartment inventory grew by 15% when it is usually10%. The increase in the number of condo towers will probably make that number grow.
This inventory will add new developments which are expected to rise this year and next. This means that the demand for small apartments at $1 million or $2 million will stay strong. But sales of "higher-end" apartments of $5 million dollars and up will not have it so easy.
The new tax plan will most likely increase the price of these higher-end apartments, making living in Manhattan ever more expensive since these estates will suffer the biggest price hits.
According to Miller, buyers have actually adjusted to the new rules, but sellers will probably take more time to catch up. He says that sellers had adjusted after 2015, but now with the new plan, they have to readjust.