The “fiscal cliff” is shaping up to be more like falling into a honey pot for Shelter Island real estate professionals.
Supervisor Jim Dougherty announced at the Friday, December 4 Town Board Meeting that the current balance in the town’s Community Preservation Fund — a real estate transfer tax used to fund open space acquisitions — stood at $129,000, but would soon grow heftier.
“December is usually a fallow or slow month for real state closings,” the supervisor said, adding that this year was the opposite. “I was given an estimate of as much as $8 million is under contract for closing in December.”
Mr. Dougherty said he had heard from people in the know that real estate sellers and buyers were heating up the end-of-the-year market by expediting deals by December 31 before new regulations on capital gains might kick in.
With uncertainty in the air over the unique economic position posed by the so-called “fiscal cliff,” the supervisor noted that buyers and sellers are poised to act, wary of a possible 5 percent or more spike in capital gains taxes that could be triggered January 1,
Putting money in real estate, or liquefying what you own, suddenly seems like a safe bet to shelter capital gains, some local brokers are saying. But it’s an up and down situation when it comes to the market here, as in sales up, but prices down.
“I think Jim’s right,” said Susan Cincotta, an associate broker with Daniel Gale/Sotheby’s. “Shelter Island is really a stable environment for real estate investments,” she said. “We are seeing more sales and we will in the beginning of the year as well,” she said.
But it’s not only fear of being taken to the cleaners by the tax man that’s driving the activity, Ms. Cincotta added. Low interest rates are also making it a hot market for buyers.
She described the Shelter Island real estate market as more stable than many other vacation areas. It tends to go up and then level off, she said. But because of a “correction in recent years,” she added, people who couldn’t afford to buy on the Island in the past can now find properties they can afford.
Broker Melina Wein agrees there’s more activity in the real estate market on the Island, but said sellers have to price their property in line with what’s going on in the world.
“The changing financial structure has a lot of uncertainty,” she said.
Looking at sales Island-wide in the past year, 39 inland properties were sold, with 24 of those coming in at or below $600,000. Another nine came in between $601,000 and $1 million, and there were six sold at more than $1 million.
There were 12 waterfront properties sold and three more are expected to close within a week, Ms. Wein said. Prices on waterfront properties are particularly hot, rising faster than those in any other sector, Ms. Wein reported. Four of the waterfront properties she brokered actually came in over their assessed values.
“Some of that bigger money, we’re starting to see again,” Ms. Wein said.
But Janalyn Travis-Messer, a broker at Griffing & Collins Real Estate, isn’t convinced the market is showing significant improvement on the Island just yet.
“It’s a very interesting opinion,” Ms. Travis-Messer said about Mr. Dougherty’s remarks. “But I’m not sure it’s true.”
She suspects there probably are investors looking to get out of other markets and secure their money in real estate now, but from what she’s seeing, sales are on a par with what they’ve been in recent years this season.
As for seasonality, while it’s true that spring sprouts a lot of buyers into the market, plenty also show up to buy in the fall, Ms. Cincotta said. They’ve visited during the summer, decided they like Shelter Island, and want to buy now so they can make any necessary repairs and prepare their new homes for the next summer with time to spare.
Real estate pros, like everyone else, are watching the political horse-trading, but with particularly close eyes on bottom lines.