Manhattan luxury deals resist second-home tax worries

Manhattan’s luxury housing market has not shown the immediate pullback some real estate figures predicted after New York approved a tax on second homes. Brokers and market analysts said June deal activity stayed firm as tight supply and cash-rich buyers kept pressure on the high end of the market.

Olshan Realty counted 126 signed contracts in June for Manhattan apartments priced at $4 million or more. That was slightly above the 124 contracts recorded during the comparable four-week period a year earlier, according to the firm.

The new surcharge, often called a pied-à-terre tax, was approved May 27 by Gov. Kathy Hochul and state lawmakers. It applies to non-primary residences with city-assessed values above $1 million and took effect this week, according to the measure described by CNBC.

Some brokers, developers and real estate lobbyists had warned the tax could chill demand, delay development and push wealthy owners toward lower-tax states. The Real Estate Board of New York said after passage that the tax would reduce market activity, weigh on values, hurt construction and weaken the city economy.

Early market data has not matched those warnings. Brown Harris Stevens said the average Manhattan apartment price in the second quarter rose 5% from a year earlier to about $2.2 million, the second-highest level the firm has recorded.

Compass reported sharper gains at the top of the condo market. Sales of condos priced from $10 million to $20 million rose 55%, while sales above $20 million increased 33%; average asking prices in that top segment were up 14%, according to the brokerage.

High-end buyers keep signing

June transactions included an $80 million duplex penthouse in a new condominium near the West Village, a $26 million downtown condo and a $22 million Upper East Side co-op, according to brokers cited by CNBC. Agents said some buyers hesitated when the tax was proposed, then resumed searches as details became clearer.

Scott Hustis of Paradigm Advisory at Compass said a $16.5 million duplex penthouse he listed at Madison Square Park Tower drew interest in April before one buyer paused after the tax proposal emerged. Hustis said buyers returned by late May, and the apartment went into contract June 6.

If that apartment is not used as a primary residence, CNBC reported it would face more than $98,000 in pied-à-terre tax this fiscal year on top of property taxes, based on city valuations. Hustis declined to identify the buyer or say whether the home would be a primary residence.

Lawyers in the market expect disputes over valuations, co-op rules, residency status and other issues tied to the tax, according to CNBC. Hochul and Mayor Zohran Mamdani have said the tax will produce $500 million a year, while the New York City Comptroller’s Office estimates annual revenue of about $340 million to $380 million.

Supply is tightening

Jonathan Miller, chief executive of appraisal and research firm Miller Samuel, said luxury inventory is down 40% from last year. Miller said supply is now at the lowest level he has seen since he began tracking the market in 2004.

Marc Palermo of Douglas Elliman said his $19 million listing at 565 Broome St. attracted offers 20% to 25% below asking in late 2025 and early 2026, but the building did not cut its price. Palermo said the apartment received a strong offer and went into contract at the end of June.

Palermo said that buyer already owns in the building and is likely to owe the second-home tax because the buyer is not a primary New York tax resident. He also said two earlier bidders recently bought other apartments priced at $15 million and $17 million.

Brokers told CNBC that many high-end Manhattan purchases are being made in cash. Palermo said some buyers under 40 are using money from parents, family offices or trusts, adding another source of demand in a market where inventory remains scarce.

This story draws on original reporting from CNBC.