The city’s Independent Budget Office is predicting city tax revenues from real estate sales will drop by almost one-third this fiscal year (July ’07 to June ’08). Real property transfer tax and the mortgage recording tax provide a barometer of the health of the real estate market—the city saw an all-time high $3.3 billion between the two taxes in FY 2007—as a slice of every transaction and mortgage comes into city coffers.
“IBO forecasts a major residential market slowdown in calendar years 2008 and 2009, with fewer transactions and stagnant prices,” an IBO report [PDF] released today says, adding that it expects continued, if modest, growth in commercial real estate. “The slowdown will extend to Manhattan, although median prices there are expected to increase modestly. Declines in other boroughs are expected to be more pronounced.”
Taken with a decline in Wall Street profits (the report predicts Wall Street will realize a mere $5 billion in profits when all is counted from 2007, down from the $20.9 billion seen in 2006), the IBO is painting a not-so-rosy picture of the city’s fiscal health. Projected for the upcoming budgeting season: a $3.1 billion budget gap for the next fiscal year (FY 2009), followed by a $4.6 billion gap in 2009.
The IBO and the city’s Office of Management and Budget are historically conservative in their estimates, and for much of Mayor Bloomberg’s term have underestimated the revenues that came into the city. Of course, analysts weren’t predicting a possible recession at the time, but hey, who knows what can happen?