The severe housing shortages that homebuyers in more affordable price ranges are experiencing are not present in the Los Angeles luxury home market.
Redfin.com’s filter search revealed 400 listings for single families over $5 million, or around 18% of the city’s total inventory of about 2,200 homes for single families.
Los Angeles Luxury Homebuyers
Yet purchasers in this price category are far scarcer. According to data examined by SmartAsset, buyers of a $5 million home must earn roughly $850,000 per year, a bracketed range that encompasses less than 1% of Californians. (Note: The typical American household earns roughly $70,000.)
Yet, the so-called mansion tax, also known as Measure ULA, was implemented by the city of Los Angeles in April to assist pay for solutions to the homeless epidemic in the area.
For properties sold for above $5 million and over $10 million, additional taxes of 4% and 5.5%, respectively, were imposed under the measure. Also, there was the city’s standard transfer tax.
Los Angeles’ appetite for properties over that price point was dampened by the new regulation.
In contrast to the 126 condominiums and homes that were sold in March, one month prior to the ULA deadline, only two properties sold in Los Angeles in April were valued at more than $5 million, according to the Los Angeles Times.
Sellers tried to sell their properties before April because they were aware of the impending tax.
One developer offered the purchaser of their $16.5 million property, a brand-new residence in Beverly Hills, an Aston Martin, Bentley, or McLaren automobile, provided the transaction took place before April 1.
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A High-Profile Sale with a Significant Price Cut
Even after a $500,000 price reduction, the house has yet to sell and is still on the market.
Only after a $32.5 million price reduction did actor Mark Wahlberg sell his Beverly Hills mansion in February for $55 million.
The city’s ULA tax calculator estimates that a property transaction of $5,000,001 generates $222,500 in tax revenue.
The $5.7 million and $7.5 million price tags of the two opulent mansions that were sold in April raised more than $500,000 for Measure ULA.
But, there are indications that buyers are returning, according to Altman, who noted that May was the month with the most closings and that June is looking like it’s going to double that.
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