With the average interest rate on a 30-year mortgage above 6% and expected to rise again this year, condo buyers in New York City are looking to tax abatements like 421-a to offset the pain.
“The monthly debt to income ratio for a buyer is 35% more compared to last year,” said Takk Yamaguchi, agent with Compass, explaining how the difference between a 3.5% rate and 6% rate boils down to higher overhead.
“[You can] offset those monthly debt obligations by looking at projects with an existing tax abatement,” he said.
According to a recent report from real estate intelligence company Marketproof, more than 3,500 new development sponsor units in New York City come with an active 421-a tax abatement. Many still have ten or more years left of the incentive — a compelling perk for those looking to buy now, despite the challenges.
“The buyers that are still out there have shown an avid interest in tax abated buildings, specifically buildings that still have years left on their tax abatement,” said Marie Bromberg, real estate agent with Compass.
Examples include One Manhattan Square in Two Bridges, where 421-a perks are active through 2039, with owners getting 100% relief through 2030. The 81-floor, 814-unit development is currently one of the top-selling projects in New York City based on monthly sales volume. Nearly 60% sold, developer Extell is averaging 6.3 monthly sales condos starting around $1 million, a price point that speaks directly to rate-sensitive audiences.
At The Rennie, BRP Development’s Harlem condo, 421-a runs through 2043. The new development is hitting a sweet spot in the market for buyers searching below $2 million
“Buyers are also willing to go further out on the hunt for the tax abatements,” Bromberg added. “Those who had previously only considered Brooklyn are now considering projects in Manhattan and even Queens if it means lower monthly costs.”