A few days ago, THE WALL STREET JOURNAL published an article elaborating on the powerful impact of the 2017 Federal Tax Bill on the Miami’s luxury real estate market. I was honored to be one of their interviewees and share my thoughts on where these high-end buyers are coming from, based on my recent encounters and experience. Take a moment to read through the copy as you will find some interesting insight and reasons why you should, also, move to Miami Beach.
While Florida has always been a no-state-income-tax state, this 2017 change in the federal tax law capped the deduction for state and local income and property taxes at $10,000, and also capped the mortgage interest deduction to $750,000 - both applicable in all states throughout the country. This change did not affect the lower earners much, but it did impact high earners in high state-income-tax states tremendously. Below are the highlights of the article relevant to Florida's luxury real estate market, and my quote.
Named, “Out-Of-State Buyers Flock To Miami,” the article starts with stating that many public officials in high tax states are becoming concerned about high earners moving to low tax states as a result of this recent change in the federal tax law. The article mentions New York as one of the most impacted states, and continues, "One of the biggest winners from this shift has been Miami. The city is experiencing more activity than usual from buyers living in states like New York, New Jersey and Illinois. People are drawn to the city by mild weather - as always - and by deals on condos and lower taxes. They are stepping in after foreign buyers, who helped lift Miami's condo market out of a tailspin following the financial crisis, have pulled back."
Furthermore, they write, "Florida had the highest level of net domestic migration from July 2017 to July 2018, according to U.S. Census data released in December. New York was the largest overall population loser, followed by Illinois. Florida also has been steadily creating jobs in recent years, gaining 231,000 jobs in 2018, a 2.7% increase over the previous year, and bringing the unemployment rate down to 3.3% in December, according to the state."
The article then gives data about the median price for condos in Miami-Dade County, which according to our own company - EWM Realty International, the median price has increased to $235,000 in the fourth quarter of 2018, which comes to a 2% rise from the previous year. It continues with, "While high-end condo prices in Miami have flattened out or even declined a bit in recent months as foreign buyers have pulled back, the market is holding up much better than New York City's. Manhattan co-op and condo sales last year were down 12% from 2017 to their lowest level since 2009, a Wall Street Journal analysis found."
As the exclusive listing agent for 8 homes in Miami Beach priced over $10M, including 3 priced over $20M, on a daily basis I come across most of the luxury buyers looking to buy in Miami Beach. I shared my experience with the WSJ where they write, "Nelson Gonzalez, a senior vice president at EWM Realty International in Miami, said that in the past year most of the buyers for high-end listings that he encounters are from high-tax states in the U. S.-a big change from several years ago when he mostly saw foreigners. "Ninety percent of all the deals over $10 million were tax refugees," he said."
The article gives an example of an increase in positive net change of buyers in one of Miami's new high-end condo developments, stating, "At the Paramount, a 60-story tower in the Miami Worldcenter development, the number of U.S. buyers increased 24% in 2018 over the previous year, said Nitin Motwani, developer of the project."
The WSJ ends the article with data provided by Realtor.com, stating that all 10 counties with the biggest increase of online searches of Florida's properties over $1 million in 2018 have higher effective real estate tax rates than Florida's. Some of these counties include Nassau County, N.Y., and Morris County, N.J.
Click Here to read the entire article from the WSJ or continue reading this blog for the highlights relating to our luxury real estate market.
The single-family luxury real estate market in Miami is off to a great start in 2019 with 4 sold high-end homes, two of which we sold; 6010 N Bay Road in Miami Beach closed for $17,000,000 and 250 Harbour Drive in Key Biscayne closed for $10,100,000.
While inventory levels in the luxury segment in Miami Beach and Miami may still be on the high side, the WSJ article gives the perfect overview and why better times are on the horizon for our market.
If you need help selling or buying luxury real estate in Miami Beach, contact Nelson Gonzalez at 305.674.4040 or Nelson@NelsonGonzalez.com
This update was written by Julijana Rose, Realtor and Marketing Director at THE NELSON GONZALEZ TEAM. Reach Julijana at Juiljana@NelsonGonzalez.com