Manhattan luxury real estate sales hold firm

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

A month after the passage of a tax on second homes in New York City, sales of luxury real estate remain strong and inventory is falling, according to brokers and analysts.

When New York Gov. Kathy Hochul and the state legislature approved the so-called pied-à-terre tax on May 27, real estate agents and developers predicted an immediate impact. Brokers said the New York wealthy would flee to Florida, developers said they would halt new projects and real estate lobbyists predicted declines in employment. Many cited what they called “the Mamdani effect,” referring to New York City Mayor Zohran Mamdani and potential wealth flight from taxes.

“The tax on second homes will dampen market activity, reduce property values, hurt new development and weaken the city’s economy,” the Real Estate Board of New York said in a statement soon after the measure passed.

Yet sales of luxury apartments show little signs of weakness. There were 126 contracts signed for apartments priced at $4 million or more in June, up from 124 during the same four-week period last year, according to Olshan Realty.

The average price of a Manhattan apartment reached its second-highest level ever during the second quarter, up 5% over the past year to roughly $2.2 million, according to Brown Harris Stevens. Sales of condos priced between $10 million and $20 million surged 55%, according to Compass. Sales of condos over $20 million were up 33%, with average asking prices up 14%, the real estate brokerage said. 

The deals in June included an $80 million duplex penthouse in a new condo building near Manhattan’s West Village, a $26 million condo downtown and a $22 million co-op on the Upper East Side. Brokers say that while some buyers were initially spooked by the tax, the flood of liquidity from recent initial public offerings and soaring wealth from asset prices has outweighed their fears.

“The amount of money out there is insane,” said Lauren Muss of Douglas Elliman, who had a $17.5 million condo listing go to contract in June. “We’re seeing big things come to us every day. It’s only getting stronger.”

It’s too early to judge the long-term impacts of the tax, of course. And real estate lawyers say there will be years of litigation related to valuations, co-op boards, residency status and other issues related to the new tax. While Hochul and Mamdani have said the tax will raise $500 million a year, the New York City Comptroller estimates it will raise about $340 million to $380 million.

Yet top brokers said the pied-à-terre tax fears are quickly subsiding. The surcharge, imposed on non-primary residences valued by the city at more than $1…