While 2017 was full of excitement and change for the real estate market, it’s safe to say that 2018 will be even more interesting. Now that the US is set to be impacted by the largest rewriting of the tax code in years, luxury real estate is sure to see some transformation, particularly as Congress minimizes tax deductions for interest on mortgages and property taxes.
The lack of tax deductions for local and state income tax could lead to a small period of uncertainty as wealthy individuals look for opportunities to move from some higher-tax states like Connecticut and New York, into lower-cost spaces like Florida. Here are just some of the trends you’re likely to see in luxury real estate as we move ahead into 2018.
Popularity for Certain Real Estate Markets
During 2017, cities like New York saw a significant increase in sales, as sellers minimized they’re asking prices in an attempt to attract new buyers. This trend is something that might continue during 2018, as these locations are hit more heavily by the tax reforms.
The discounts of 2017 saw sales in the luxury real estate market to increase by 7%, though the average sales price declined by the end of the year. Greater sales, along with bigger discounts may be a trend that we continue to carry into 2018, depending on how significant the tax reforms are when it comes to flipping luxury houses.
Real Estate Inventory and High-Rise Renovations
Another trend that may appear in 2018, is a desire to get as much value as possible for the land purchased. Many developers this year are pushing forward with renovation for luxury towers and high-rise buildings, despite the change in prices and the risk of supply exceeding demand. There are already a host of prime towers ready to be built around Central Park for the billionaire buyer market.
All the while, real estate experts believe that inventory in the luxury real estate market will continue to increase. This will be the first time that we’ve seen a significant rise in inventory since 2015. Although there’s some chance that inventory will decline throughout the first portion of the year, the peak home-buying months around the fall could bring a host of new buyers into the market, ready to explore the options in cities with the lowest tax points. It may be that we see more luxury houses in the coming year, while the inventory for “first-time-buyer” homes remains somewhat static.
Luxury Real Estate
Finally, with the tax reform of 2018 poised to make a significant change to the world of luxury real estate, it’s likely that we’ll continue to see a change in the way people invest in property and renovation. As home prices continue to appreciate, mainstream homebuyers and investors alike will need to find more creative ways of sourcing the money they need.
While creative tools for financing like crowdfunding and peer-to-peer marketplace lending have begun to see more popularity in recent years, they could become even more noteworthy during 2018. Investors searching for passive income opportunities and diversification will increasingly be looking for ways to engage in group investments, as the tax changes leave the market in flux.
Individuals who are searching for alternative sources of funding may also found that crowdfunding and marketplace lender partnerships help them to make the most of the new luxury real estate market.
