Luxury home prices in Florida are booming. They haven’t risen as quickly in the last 5 years, according to Redfin Data.
Prices in Florida’s luxury home market began to take off in January 2018 when the Republican Tax Act of 2017 went into effect. In Q2 2018, Florida’s luxury home prices jumped a lofty +16% from Q2 2017, again according to Redfin Data.
An owner of a financial services firm recently based in Connecticut, Jason Phillip Parker, who is now the CEO of Douglas Elliman Real Estate’s operation in Florida, is a recent migrant to Florida. Parker said, “The trigger (to sell) is tax reform. My clients tell me flat out, ‘I made this move because of taxes.’ The implications (of the tax overhaul) are hugely significant, if you’re a high-income earner.”
Like all real estate markets, Florida’s luxury real estate market varies by localities. The price gulf widened as the top 5% of luxury properties in the state rose at the fastest pace, +16%, in 5 years. The balance of properties, 95% of the non-luxury properties elsewhere in the state, rose “just” +7% compared to Q2 2017.
Gus Faucher, the CEO of PNC Financial Services, Group, Inc. said that the cap in property and state and local tax deductions “…changes the relative cost of living between high cost and low cost localities…” and that relative cost differential “…is going to influence people’s decisions…” in places such as the affluent suburbs of NYC like Westchester County, Connecticut, and New Jersey.
In addition to moving to Florida, wealthy New Yorkers are moving outside their normative comfort zones. Rather than moving to Naples as they have in the past, New York’s tax refugees are moving to Sarasota, a hotspot for Midwesterners.
Sales of +$1M homes in southwestern Florida rose +25% in the first half of 2018 compared with Q1, Q2 2017. This +25% climb is the fastest rise in sales in at least a decade, according to Florida Realtors’ data dating back to 2008.
Brad O’Connor, chief executive with Florida Realtors said that Baby Boomers, already in peak downsizing mode, added to this price and sales escalation due to tax reform refugees. “…Tax reform might have pushed them (Baby Boomers) over the top. Combine these two demographics together and you get these price and sales jumps”
