All over the world, foreign investors and buyers have been hit with a penalty tax for buying properties and using them as a pied-a-terre, or temporary residence. When the market is hot in these foreign countries, buyers and investors flood the market, driving prices up. Several countries have said enough is enough. In October 2012 the Hong Kong government imposed a 15% tax on properties purchased by anyone who was not a permanent resident. This was in response to the events in 2011, when foreign buyers’ demand for properties forced the average price for a mid-sized apartment to skyrocket up by 65%. In the 2 years since the tax was imposed the same mid-sized apartment price only rose by 5.3%
Other countries have followed similar suit. Singapore imposed a 15% tax on foreign buyers. Switzerland set a 20% cap on the number of pieds-a-terre in any community. Britain imposed a “stamp tax” on pieds-a-terre. Australia introduced 3% and 4% taxes on foreign home buyers. Vancouver set a 15% tax on foreign property buyers. Where does that leave New York City?
New York City has not imposed a tax on foreign buyers. One reason is that in New York City, no one wants to raise taxes, and those elected in political office avoid the subject all together. It seems that foreign buyers aren’t really driving prices up in New York City. The average apartment prices only rose 13% over the past year according to a report by Douglas Elliman, while the market shows signs of slowing down. Also anti-discrimination laws prevent brokers and city agencies from collecting dating on the amount of foreign property buyers. Translation, no one knows how many foreign buyers there are. The New York Times cited census data in 2014 showing that more than 50% of apartment units within a 3 block area of Midtown East were vacant the majority of the year. If no one is there for most of the year, then they won’t be using up any of the resources available in that area and building. Do you think the lack of tax on foreign buyers is hurting or helping New York City?
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