NYC Area’s Tax-Reform Refugees Fuel Luxury-Home Boom in Florida

Views of the ocean and beach are seen from the Regalia luxury condominium in Miami Beach, Florida, U.S., on Tuesday, Feb. 11, 2014. Miami, just four years ago the poster child for overleveraged condo buyers who walked away as values plummeted, is turning a new page. Burned by the recession and unable to get financing, developers are now building ultra-luxury towers, based on cash deposits from high-net-worth buyers. Photographer: Christina Mendenhall/Bloomberg

 

NEW YORK – Aug. 14, 2018Luxury-home prices in Florida have climbed 16 percent in the second quarter from 2017 following the U.S. tax overhaul, according to data from Redfin Corp. The law’s $10,000 cap on the tax deduction of state and local taxes is hitting owners in the wealthy suburbs of New York City, including Westchester County, N.J., and Connecticut.

“The trigger is tax reform,” says Jay Phillip Parker, CEO of Douglas Elliman Real Estate’s operations in Florida. Parker says he’s seen many of his clients move to the state in recent months.

“They’re telling me flat out: ‘I made the move because of taxes.’ The implications are hugely significant if you’re a high-income earner,” Parker says.

Prices for the top 5 percent of properties in Florida rose at the fastest pace in five years, even as values in the rest of the Florida market increased only 7 percent, according to Redfin. Sales of southwestern Florida’s million-dollar homes during the first half of 2018 were the highest in at least a decade, rising 25 percent from a year earlier, according to Florida Realtors.

There may be other reasons coming into play for the sudden hike in demand for the Sunshine State’s luxury homes, however. For one, the tax changes generally favor affluent Americans, who may be using the savings to buy second homes, with Florida being their comfort zone.

In addition, baby boomers are now in the prime downsizing years, says Florida Realtors Chief Economist Brad O’Connor. “We were at peak boomer anyway,” O’Connor says, “but tax reform might have pushed them over the top.”

Source: Bloomberg (08/09/18) Gopal, Prashant