Issue 113 - Where is the Real Estate Market Heading? The Big Questions

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Issue 113 – Where is the Real Estate Market Heading? The Big Questions

September 1, 2025

As we head into fall, I am often asked about where the real estate market is heading. This year, numerous competing issues are making it difficult for me to predict exactly what will unfold. The spotty movements of this past summer raise some very big questions that we need to have answered before knowing how everything will shake out.

In general, since the pandemic, people generally value their downtime much more. Summer is a time of respite for many, eager to take a break from the stress and intensity of work—and news of all the executive orders, proposed legislation, global politics, and world wars.

Post-pandemic demand for real estate was fueled by one of the biggest run-ups in history, resulting in the typical selling times for property no longer existing and being seasonally defined. However, inflation and mortgage rate hikes have forced people to wait on the sidelines.

I think many sellers are hoping that the president’s consideration of eliminating the capital gains tax may provide a significant opportunity for those who have been sitting on properties for decades to reap a solid return on their investment.

As such, it would allow them to cultivate true wealth creation by saving on considerably high capital gains, which in turn becomes the catalyst for people to be able to buy and sell with a higher profit. As with all political maneuvers, it remains to be seen how this will ultimately play out.

CNBC breaks it down this way:

Under current law, property sales are subject to capital gains taxes once profits exceed $250,000 for single filers or $500,000 for married couples filing jointly.
Since 1997, those thresholds have never been indexed for inflation, and more home sales are subject to capital gains as property values rise.

“Homeowners who have lived in a home as their primary residence for at least 24 months in the five years before the sale receive an exemption on the first $250,000 of gains for individuals and $500,000 for married couples filing jointly,” Newsweek reports.

The National Association of REALTORS’ research has found that nearly 29 million homeowners, roughly one-third of the market, already face potential capital gains taxes if they sell, “and that number is expected to climb sharply over the next decade.”

“These tax burdens create a ‘lock-in effect,’ especially for seniors, discouraging people from selling and keeping much-needed homes off the market,” Newsweek summarizes.

This proposal aside, at the end of the day, we are dealing with a much more fundamental issue in NYC: the mayoral race. Until it is decided who is elected, we won’t know what is going to happen here, especially whether the potential new legislature could lean towards socialism or capitalism. Ultimately, who is in power will determine how the city values real estate as an asset.

If the Democratic nominee, Zohran Mamdani, wins the election, potential real estate impacts involve rent stabilization and affordability, such as a rent freeze for rent-stabilized apartments. This could potentially disincentivize property owners from investing in maintenance and improvements, impacting the quality of NYC housing stock.

Mamdani also claims to want to invest in 200,000 publicly subsidized affordable housing units over a 10-year period. Some experts suggest this large-scale construction effort would be wrought with challenges.

More importantly, according to CNN, Mamdani’s real estate proposals are sending jitters through the NYC luxury real estate market. His proposed “millionaire tax” would prompt luxury home buyers and owners to consider moving out of state, which could significantly impact this market segment. Additionally, developers and investors would also face reduced incentives.

Fox Business concurs, citing a real estate expert who reports, “Consumers are taking a step back to wait and see how this plays out, because if a socialist is elected mayor of New York City, I don’t think it’s going to be good for the long-term health of our local economy and the real estate industry.”

While Andrew Cuomo and current mayor Eric Adams are still duking it out as NYC’s independent frontrunners, a win for Cuomo would ostensibly mean prioritizing and streamlining development processes, potentially leading to faster approvals and fewer regulatory roadblocks. He is also a proponent of zoning changes, which can lead to gentrification in some areas. As such, Politico suggests the well-heeled industry is rallying around his bid for mayor.

And lastly, if Adams secures a win, he would likely continue to keep housing supply a central focus, particularly with his “City of Yes” initiative, which aims to build up to 80,000 new homes in 15 years, and his “Manhattan Plan” to add 100,000 new homes in that borough over the next decade. Like Cuomo, his plans would include zoning changes, massive conversions, and encouraging development around transit hubs. Adams also supports allowing accessory dwelling units (ADUs) and eliminating parking mandates for new construction to facilitate the creation of housing. According to a NY1 segment this summer, “Mayor Eric Adams may be the new favorite candidate of the city’s business and real estate community.”

If Adams is successful in increasing housing supply and affordability, he could possibly slow the rapid real estate appreciation NYC has seen lately, especially in the luxury market, according to NY1. “Some wealthy New Yorkers have expressed concerns about potential tax increases or changes in policy under a different administration, potentially accelerating their plans to move outside of NYC.”

Lastly, the Republican candidate, Curtis Sliwa, would likely modify or repeal Adams’ “City of Yes” initiative and revert zoning to its previous state. This could mean a slowdown or halt to development projects already in motion and deter others from starting at all.

Sliwa does suggest ending unfair property tax increases on working-class owners and forcing large corporate landlords to pay more. He might also repeal the 2019 laws targeted at rent-stabilized landlords.

According to the New York Post, in essence, “a Sliwa victory could lead to a shift in real estate priorities, with a stronger emphasis on local zoning control, fair taxation for homeowners and renters, and the revitalization of existing housing stock, possibly impacting large-scale development and corporate real estate interests.”

As we watch all this play out, eager buyers and sellers are sitting on the sidelines, ready to cast their lines once the direction of potential changes and local initiatives becomes clear. Only time will tell, but one thing is already clear: The real estate market in NYC is always a key focal point, not just locally, but nationally and globally. All eyes will be on NYC this fall, keen on seeing what transpires and how real estate experts guide clients to maximize their value.

Issue 123 – The NYC Pied-à-Terre Tax and its Implications on the Real Estate Market

July 1, 2026

Lately, we have been hearing the slogan “Tax the Rich” frequently. This is often espoused in reference to the newly implemented pied-à-terre tax in NYC.

It implies the rich aren’t paying taxes. The reality is quite different. Yes, there are some very wealthy people who pay far less in taxes than others earning the same or similar amounts. But New York City taxpayers pay the most local taxes in all of the U.S. The laws that need to be addressed are federal ones, not local. The loopholes touted are affecting just a select few, when in reality most high-net-worth folks are indeed paying a lot of taxes — especially New Yorkers, who pay $21 billion more to the state every year than the state spends on NYC.

The latest controversy stems from New York City’s enactment of a pied-à-terre tax—an annual surcharge on high-value homes that are not used as a primary residence. If you own a luxury second home in the city, you may now have a recurring tax exposure on top of other friction costs. The tax is also an annual recurring fee, not a one-time hit like the mansion or transfer tax, which makes it more pervasive.

According to a recent report by the NYC Comptroller, the legislation is expected to phase in from July 1, 2026, through June 30, 2028 (fiscal years 2026—2028), with the first phase focused on city “market value” thresholds. Early reporting indicates that the tax applies broadly to high-end second homes and provides different treatment for single-family homes versus co-ops and condos. For houses valued at roughly $5 million or more, the surcharge has been reported at 0.8%–1.3%. For co-ops and condos, the initial phase appears tied to Department of Finance values starting around $1 million, which can translate into a much higher market sale price.

I am seeing a lot of confusion about how this will be implemented. Essentially, people believe that any sales price over $5 million will be affected, when in fact Phase 1 will be based on land value, not the transactional equivalent sale price. For example, a property valued at $844,000 may not be captured by the pied-à-terre tax. It’s less than $1 million and nowhere near $5 million.

However, Phase 2 (for fiscal years 2028–2031, beginning July 1, 2028) becomes a much more speculative concern. Early indications suggest that the tax will be based on the more transactional side of things. It may even work on factoring a five-year average; we simply don’t know yet.

Some savvy buyers are trying to close before Phase 1 starts. Others are trying to keep their price below $5 million and then essentially work any credits as a side agreement to avoid the potential second-phase hit.

As Business Insider reported, “In its first two years, the tax will rely on Department of Finance ‘assessed values’ to determine which homes will face a new charge, while the city and state work out a new valuation system.”

Likewise, a recent CNBC segment details: “Billionaire and Citadel CEO Ken Griffin became the face of the tax after New York City Mayor Zohran Mamdani posted a video in front of Griffin’s penthouse apartment announcing the tax.”

I believe the pied-à-terre tax punishes people who use our services less than full-time residents. They also pay massive transfer and mansion taxes and typically don’t use our schools — a huge portion of real estate tax revenues.

My view is that this will not destroy the New York market, but it will absolutely change behavior at the margins. Buyers are already more sensitive to carrying costs, monthly common charges, assessments, the mansion tax, financing costs, and now an additional annual second-home tax. The psychological impact may be just as important as the financial one.

The highest end of the market will feel this first. For discretionary buyers, especially those comparing NYC to Palm Beach, Miami, Aspen, London, or other global luxury markets, this becomes another line item in the decision-making process. It may not stop a true New York buyer, but it may slow them down, sharpen their negotiations, or push them toward renting instead of buying.

As a result, I expect high-end rentals to benefit. A buyer who wants a New York City presence but does not want the tax complexity may choose to rent a trophy apartment instead. That could strengthen demand for luxury rentals, especially furnished, turnkey, white-glove inventory.

For co-ops, the impact may be more nuanced. Co-ops already have a smaller buyer pool because of board scrutiny, financing restrictions, and liquidity requirements. If the tax makes second-home buyers more cautious, certain high-end co-ops may feel additional pressure, especially those with significant monthly maintenance or less flexible sublet policies. That said, as I always point out, the very best buildings with scarcity, provenance, service, and location will still hold value.

I have not yet seen a wave of people selling solely because of this tax, but I have absolutely seen buyers pause, ask sharper questions, and reconsider the total cost of ownership. The conversation has shifted from “What is the purchase price?” to “What is my all-in annual exposure?”

Other markets have tried versions of second-home or vacancy-style taxes, with mixed results. In some places, they created revenue and pushed underused housing back into circulation. In others, they caused buyers to become more cautious or redirected capital elsewhere. New York is different because it remains New York — but the city cannot assume that capital is captive.

Again, citing Business Insider, “Hochul and Mamdani estimated the tax could raise $500 million.”

So, are there any benefits? Potentially. If the revenue is used responsibly, it could support city services and housing priorities. It may also create a clearer distinction between end-user demand and purely discretionary ownership. But from a market perspective, the risk is that it adds friction at a time when the luxury buyer is already highly selective.

My advice to second-home buyers is simple: do not overreact, but underwrite carefully. Understand whether the property will be classified as a primary residence or pied-à-terre. Review the building’s carrying costs, taxes, assessments, liquidity requirements, and resale profile. Buy quality, buy scarcity, and buy something you would be comfortable owning through a softer market.

It’s important to keep all in perspective: Mayors come and go, and when you start impacting the very hands that feed you in one of the most capitalistic cities that ripple through the nation, I think we stand the test of time on how we are going to navigate this.

The New York City buyer is not disappearing. But the casual, optional buyer now has one more reason to pause — and in this market, that matters.