Tax hike means home buyers can afford less

By Jane C. Timm | December 31, 2008 03:12PM

Starting tomorrow, homeowners will have another worry on their minds — higher taxes. But will the real estate market and homeowners really be hit hard by the uptick in taxes?
Neil Binder, principal and co-founder of Bellmarc Realty, said that this tax hike is another smack to an already hurting market. Current market conditions are “just scaring the dickens out of everybody,” he said. As this tax adds to homeowners’ general costs, “they will be able to afford less,” and buyers will “be more conservative in making bids.”

Current homeowners are looking at noticeable jumps in their
taxes. A Manhattan
condominium unit valued at approximately $300,000 to $400,000 will see its bills
jump $478 a year according to the city’s Independent Budget Office. Further up the ladder, a condo valued at $1.5 million to $2 million in Manhattan will see their
property taxes jump about $1,041.

Kathy Braddock, a founding partner in real estate consultancy Braddock + Purcell and brokerage New York’s Charles Rutenberg Realty, acknowledged the potential effect.

“It’s a hike, but it’s not astronomical,” she said, but it is “one more thing” that buyers will have to deal with when considering buying a home.
City Connections Realty’s associate sales broker Steve Weber doesn’t think it’s going to change Manhattan sales overall, but agreed with Binder that for individual buyers, “if your taxes are a lot lower, you’ll be able to afford more apartment.”

The tax increase, which Mayor Michael Bloomberg signed into law on Monday, technically repeals an earlier tax cut which was supposed to expire in June. Mayoral spokesperson Mark La Vorgna attributed the law to the recession, which made it necessary to raise taxes earlier than expected.

Some real estate pros said they don’t think the tax increase alone will have a significant impact.

Richard Grossman, director of Downtown sales at Halstead Property, doesn’t see a problem for the market as a whole, so long as buildings keep costs down.
These new taxes will be “shrugged off relatively easily,” he said. As long as buildings keep their maintenance fees at competitive rates, Grossman said, the additional tax bill won’t affect sales. “Everyone’s being hit across the board,” Grossman said. It’s not something anyone can change, so it’s going to have minimal market consequences, he added.
The hike needs to be put into context, Grossman said. Oil prices and interest rates are going down. Those drops will cushion the blow to homeowners’ wallets, he said.

Charles Rutenberg’s Braddock agreed, saying that low mortgage rates will help to offset additional costs.

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