Big Drop Is Seen in Real Estate Tax Revenues
February 11, 2008
The city and state governments are bracing for a precipitous drop-off in the tax revenues they will receive from real estate transactions.
The city is forecasting a 39% decline in sales volume for all commercial transactions through 2009, and the median price of those transactions is expected to decline by 32%, according to its latest budget projections. Fewer sales at lower prices are leading to projections of declines of hundreds of millions of dollars in revenue derived from both the real property transfer tax and the mortgage recording taxes.
Since roughly 2002, low interest rates, a weak dollar, and rising office rents have paved the way for explosive growth in the commercial real estate market. The repeal of the “Cuomo Tax” on commercial real estate transactions 11 years ago increased the number of billion-dollar deals, which in turn helped fill city and state coffers.
In the last five years of the real estate boom, the real property transfer tax and the mortgage recording tax have been a windfall for the city and state, accounting for more than $4 billion in combined revenues last year.
The real property transfer tax imposes a levy on people or businesses selling property, who must pay up to 2.6% of the sale price to the city. The state has a similar tax, which takes in less than 1% of each transaction. The city and state also impose a mortgage recording tax. Depending on the type of property and its location, the taxes can range from 75 cents to $2.75 for each $100 of debt secured by the mortgage.
Source: NY Sun Read the full story here
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