Manhattan luxury real estate sales hold firm despite fears of a 'Mamdani effect'

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A month after the passage of a tax on second homes in New York City, sales of luxury real estate remain strong and inventory is falling, according to brokers and analysts.

When New York Gov. Kathy Hochul and the state legislature approved the so-called pied-à-terre tax on May 27, real estate agents and developers predicted an immediate impact. Brokers said the New York wealthy would flee to Florida, developers said they would halt new projects and real estate lobbyists predicted declines in employment. Many cited what they called "the Mamdani effect," referring to New York City Mayor Zohran Mamdani and potential wealth flight from taxes.

"The tax on second homes will dampen market activity, reduce property values, hurt new development and weaken the city's economy," the Real Estate Board of New York said in a statement soon after the measure passed.

Yet sales of luxury apartments show little signs of weakness. There were 126 contracts signed for apartments priced at $4 million or more in June, up from 124 during the same four-week period last year, according to Olshan Realty.

The average price of a Manhattan apartment reached its second-highest level ever during the second quarter, up 5% over the past year to roughly $2.2 million, according to Brown Harris Stevens. Sales of condos priced between $10 million and $20 million surged 55%, according to Compass. Sales of condos over $20 million were up 33%, with average asking prices up 14%, the real estate brokerage said. 

The deals in June included an $80 million duplex penthouse in a new condo building near Manhattan's West Village, a $26 million condo downtown and a $22 million co-op on the Upper East Side. Brokers say that while some buyers were initially spooked by the tax, the flood of liquidity from recent initial public offerings and soaring wealth from asset prices has outweighed their fears.

"The amount of money out there is insane," said Lauren Muss of Douglas Elliman, who had a $17.5 million condo listing go to contract in June. "We're seeing big things come to us every day. It's only getting stronger."

It's too early to judge the long-term impacts of the tax, of course. And real estate lawyers say there will be years of litigation related to valuations, co-op boards, residency status and other issues related to the new tax. While Hochul and Mamdani have said the tax will raise $500 million a year, the New York City Comptroller estimates it will raise about $340 million to $380 million.

Yet top brokers said the pied-à-terre tax fears are quickly subsiding. The surcharge, imposed on non-primary residences valued by the city at more than $1 million, was first proposed in April, approved in May and officially took effect this week. It applies to residences that fit the tax criteria as of Jan. 5, 2026. So any buyers of pricey pied-à-terres this year will be subject to the tax.

Some buyers initially paused their deals when the tax was first proposed, according to agents. Scott Hustis, of Paradigm Advisory at Compass, said he listed a $16.5 million penthouse duplex in Madison Square Park Tower on April 8. One buyer expressed immediate interest and was about to make an offer, he said, but when Hochul announced the proposed tax a week later, the buyer pulled back.

By late May, however, as the details of the tax started becoming more clear, buyers came back into the market. The penthouse went into contract on June 6.

"There is a lot of confidence out there," Hustis said. "Markets are strong. A lot more New York buyers are coming out of the woodwork."

Hustis declined to comment on the buyer of the $16.5 million penthouse or whether it will be a primary residence. If not, the apartment would be subject to a pied-à-terre tax bill of over $98,000 this fiscal year in addition to property taxes, based on city valuations.

But Hustis said ultra-wealthy buyers are more concerned about buying at the right time in the market cycle rather than paying an added tax.

"Right now, they're seeing things go into contract and prices not coming down and they decide to execute," he said.

Low inventory is adding pressure to buyers. Jonathan Miller, CEO of appraisal and research firm Miller Samuel, said luxury inventory is down 40% compared to last year and is now at the lowest level he's seen since he began tracking it in 2004.

Marc Palermo of Douglas Elliman has a listing for a $19 million, 4,700-square-foot apartment at 565 Broome St., the glass condo tower whose buyers have included tennis great Novak Djokovic, Uber co-founder Travis Kalanick and niece of the president Mary Trump. In the fall of 2025 and early 2026, the listing attracted several offers for 20% or 25% below the asking price, Palermo said. Yet the building held firm to its price.

By late spring, with markets overcoming Iran war fears and the SpaceX IPO and other offerings creating massive liquidity events, the Manhattan market sprang to life, brokers said. Palermo said he got a "strong offer" for the $19 million apartment and it went to contact at the end of June. While he declined to comment on the buyer, he said they already own a unit in the building and wanted to expand. Since the buyer isn't a primary New York tax resident, they will likely owe a pied-à-terre tax.

"People took a breath, they settled into the new reality and the smart ones charged in," Palermo said.

He said the other two early bidders for the Broome Street listing also ended up closing on other apartments recently — one for a $15 million apartment and the other for a $17 million apartment. He said virtually all the high-end buyers in Manhattan are paying cash, without mortgages.

Along with the stock market gains and boom in finance, the so-called great wealth transfer is also driving demand in Manhattan. Palermo said he's doing a number of high-end deals with buyers under the age of 40 in which the parents or a family office or trust is the underlying buyer.

"We're seeing a lot of gifts coming in from parents," he said. "If you're under 40 and you're buying in New York City, chances are you're not making enough to buy on your own."