It used to be that low state income taxes and practically non-existent property taxes, at least compared the neighboring county of Westchester in New York, was more than enough to lure Manhattan's hedge fund billionaires out to Greenwich, CT. But, it seems that a festering pension crisis and resulting state income tax hikes in Connecticut has resulted in many of NYC's gazillionaires choosing a trophy 3,000 square foot apartment in "the city" over a 10,000 square foot Greenwich mega-mansion.
As the Wall Street Journal points out today, sales of ultra-luxury Greenwich estates, priced at over $10 million, collapsed after 2008 and have just continued to deteriorate year after year ever since.
There were only five sales for $10 million or more in 2015 and 2016, the slowest pace in this category since at least 2008, and less than half the average, according to brokerage Houlihan Lawrence. In all, there are 38 properties listed for $10 million in and around Greenwich, meaning it would take at least seven years to sell them all at the current pace.
Although brokers say showings have picked up this spring, some worry that among the most affluent buyers a suburban mansion in Connecticut is losing ground to a trophy Manhattan apartment.
And two massive state income tax hikes in the past 6 years, to nearly 7%, are likely to blame...
At play, also is the rising state income tax burden on the very wealthy that makes Connecticut less of a tax haven than it used to be compared with New York, brokers said. Connecticut raised its top tax rate twice in the last decade, in 2011 and 2015, to the current 6.99%.
“For the longest time we were definitely benefiting from very low state taxes,” said Tamar Lurie, an agent at Coldwell Banker Real Estate in Greenwich. “We are inching higher and of course it impacts buyers.”
“The high-end city property owner is generally staying in the city and we are not seeing the flight to the suburbs at the upper end of the market,” he noted.
...which we suspect has something to do with that pesky $68 billion underfunded pension liability.
Of course, while New York's ultra-rich, liberal investment bankers and hedge fund managers are all too willing to advocate for the "pay your fair share" political candidates, they're wholly unwilling to actually practice what they preach.
All of which raises the obvious question: where exactly will NYC's hedge fund managers park those Bugattis now that they're giving up their 8-car garages?