Luxury real estate agents in Los Angeles, California, have scrambled to sell properties as the city’s new mansion tax is slated to take effect.
Voters approved a ballot measure during last year’s elections which created a 4% tax on properties sold or transferred for between $5 million and $10 million, as well as a 5.5% tax for properties sold or transferred for more than $10 million. Sellers must continue to pay the base tax rate of 0.45% for sales and transfers, implying overall rates of 4.45% and 5.95%.
Real estate agents have therefore rushed over the past several months to dispose of their luxury properties before the mansion tax enters into effect on April 1.
Ikon Advisors is selling Star Resort, a 16,672 square-foot mansion with seven bedrooms, nearly one dozen bathrooms, and a 50,000-square-foot outdoor space for $38 million. The estate features a pool and spa, a mini golf course, a home gym, a basketball court, a car showroom, a sports simulator, and a lounge that can be used for a private club.
“Imbued with intentional style and sophistication, a home of this caliber is rare to hit the market,” the company said. “This modern sanctuary affords absolute luxury; offering an unmatched, well thought out design and world-class amenities to its future owner.”
Redfin has meanwhile listed a 9,500 square-foot home with five bedrooms and seven bathrooms in Beverly Hills for nearly $16.5 million. The estate likewise has a pool, floor-to-ceiling windows with city and mountain views, an entertainment room, and multiple lounges. Redfin is providing an “incredible limited time buyer offer” by letting purchasers choose between a complimentary Aston Martin Vantage, Aston Martin DBX 707, McLaren GT, or Bentley Bentayga EWB when they purchase the home and close the deal before April 1.
Paramount Realty started an auction for Senderos Canyon, a parcel of land with 260 acres in the heart of Bel Air, for an asking price of $125 million and a minimum bid of $39 million. The firm similarly offered a $2 million credit to any purchaser who closed on March 31 or earlier.
“A truly versatile landmark parcel, Senderos Canyon offers a diverse set of residential, commercial or hospitality development opportunities,” the company said, noting that the parcel composes 6% of the total land area in Bel Air. “Its lush grounds offer a blank canvas for a luxury residential enclave, hotel or a range of concepts such as a golf course, equestrian center, wellness center, sports campus and more.”
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The owners of the properties listed by Ikon Advisors and Redfin would be respectively liable for a $2.3 million tax and a nearly $1 million tax, respectively, should they fail to sell the properties before April 1, while the owners of the parcel under auction by Paramount Realty would be liable to pay $7.4 million.
The mansion tax was approved in Los Angeles even as voters in a statewide referendum rejected a ballot measure that would have increased taxes on personal income above $2 million by 1.75% to increase funding for zero-emission vehicle infrastructure and wildfire prevention. With an effective tax rate of 13.5%, California is among the most heavily taxed states in the country, according to an analysis from the Tax Foundation.
The new tax on luxury real estate in Los Angeles also occurs after Los Angeles County lost more residents than any other county in the United States between July 2021 and July 2022, according to data released this week by the Census Bureau, a phenomenon which follows severe lockdown mandates and an overall rise in living expenses.