2012 was a very good year for the luxury real estate market, but the question now is will that trend continue given the increase in taxes high-end buyers will face in 2013 as a result of the “fiscal cliff” deal reached in Washington D.C. earlier this month.
According to an examination of the situation by Forbes, sales of luxury homes reached a four-year high last year and the final quarter of 2012 was particularly active. That was largely the result of sellers desperate to close transactions prior to the tax rate increase. The “fiscal cliff” deal hammered out by Congress and President Obama increases the income tax on households earning more than $450,000 to 39.5 percent from 35 percent. Most observers quoted in the story believe the tax increase, along with the high-volume of activity in the final quarter of 2012, will likely lead to a slight slowdown during the opening months of 2013.
To give you an idea of how brisk activity in the luxury real estate market was at the end of 2012, Forbes notes sales in Manhattan in New York City were up 29 percent in the last quarter as compared to 2011. In Greenwich, Conn. the surge was even more pronounced. In December, sales were up a whopping 89 percent from December 2011.
Despite a potential slow down in activity during the short term, expert don’t believe it will subdue home prices. That’s because given the heavy action to close the year, supply has been squeezed which means prices should in fact still continue to increase.
A Los Angeles-based real estate professional echoed the sentiments, noting that, especially in Southern California, there is an influx of foreign buyers still looking to join L.A.’s well-heeled communities like Beverly Hills and Malibu.