Manhattan real estate is holding fast

A version of this article first appeared in CNBC’s Inside Wealth with Robert Frank, a weekly guide to the high net worth investor and consumer. sign up to receive upcoming programs, straight to your inbox.

A month after the second-home tax was passed in New York City, real estate sales 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. Realtors say wealthy New Yorkers will flee to Florida, developers say they will halt new projects and housing advocates predict a drop in employment. Many cited what they called the “Mamdani effect,” referring to New York City Mayor Zohran Mamdani and wealth tax evasion.

“A second-home tax would depress market performance, lower prices, hurt new development and weaken the city’s economy,” the Real Estate Board of New York said in a statement after the measure passed.

However, sales of luxury apartments are showing signs of slight weakness. There were 126 contracts signed on homes priced at $4 million or more in June, up from 124 in the same four-week period last year, according to Olshan Realty.

The average price of an apartment in Manhattan reached its second-highest level during the second quarter, up 5% from a year ago to about $2.2 million, according to Brown Harris Stevens. Sales of condos priced between $10 million and $20 million rose 55%, according to Compass. Sales of more than 20 million condos rose 33%, while asking prices rose 14%, real estate agents said.

June deals include an $80 million penthouse in a new condo building near Manhattan’s West Village, a $26 million downtown condo and a $22 million co-op on the Upper East Side. Traders say that while some buyers were initially upset by the tax, the flood of cash from the new public offering and the rising wealth from commodity prices overcame their fears.

“The money out there is crazy,” said Lauren Muss of Douglas Elliman, who had a $17.5 million contract for private homes going through in June. “We see big things coming our way every day. It’s getting stronger.”

It’s too early to judge the long-term effects of the tax, of course. And real estate lawyers say there will be years of litigation related to rate assessments, co-op boards, occupancy and other issues related to the new tax. While Hochul and Mamdani said the tax would raise $500 million a year, the New York City Manager estimates it would raise about $340 million to $380 million.

Yet top traders say fears of a pied-à-terre tax are quickly diminishing. The toll, which is levied on non-primary residences costing the city more than $1 million, was first proposed in April, approved in May and officially went into effect this week. Applies to residences that meet the tax criteria as of Jan. 5, 2026. So any buyers of expensive pied-à-terres this year will be subject to the tax.

Some shoppers initially put their deals on hold 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 showed immediate interest and was about to make an offer, he said, but when Hochul announced the proposed tax a week later, the buyer backed out.

By the end of May, however, as tax details began to clear, buyers returned to the market. The penthouse went under contract on June 6.

“There’s a lot of confidence out there,” Hustis said. “Markets are tight. Many 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 the first residence. Otherwise, the apartment will be subject to a pied-à-terre tax bill of more than $98,000 this fiscal year in addition to property taxes, based on city rates.

But Hustis said wealthier buyers are more concerned about buying at the right time in the market cycle than paying more taxes.

“Right now, they see things going into contracts and prices not going down and they decided to do it,” he said.

Low inventory adds pressure to consumers. Mr. Jonathan Miller, who is the CEO of Miller Samuel, said that luxury items have dropped by 40% compared to last year and are now at the lowest level ever seen since he started tracking it in 2004.

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

In late spring, with markets overcoming fears of an Iran war and the SpaceX IPO and other offerings creating major capital events, the Manhattan market came alive, traders said. Palermo said he received a “strong offer” for the 19 million apartment and contacted him at the end of June. Although he declined to comment on the buyer, he said they already have a unit in the building and want to expand. Since the buyer is not a New York tax resident, he will likely owe pied-à-terre tax.

“People are taking a deep breath, they’re really settling down and the smart ones are coming in,” Palermo said.

He said two other applicants for the Broome Street listing have also closed on other apartments recently – one for $15 million and another for $17 million. He said almost all high-end buyers in Manhattan pay cash, except for mortgages.

Along with stock market gains and capital growth, the so-called transfer of great wealth is also driving demand in Manhattan. Palermo said he does a lot of high-profile deals with buyers under 40 where parents or a family office or trust is the primary buyer.

“We see many gifts from parents,” he said. “If you’re under 40 and you’re shopping in New York City, you’re probably not making enough to buy for yourself.”