Why luxury homes, pricey properties are going on the market in King County
Windermere’s chief economist is noticing a significant number of high-end properties coming onto the market in King County.
“On the residential side we’ve already seen a fairly significant uptick in King County of listings above $1.5 million,” Matthew Gardner told KIRO Radio’s Dave Ross. “I think there are some people who are aware of this.”
They’re aware that the Washington State Real Estate Excise Tax will go up after 2019 — at least it will go up for the more expensive properties. That’s created a bit of a race to get properties on the market and close before Jan. 1, 2020.
The Washington State Real Estate Excise Tax is paid by those who sell a house or conduct commercial transactions. A total of 1.28 percent of the sale price goes to the state, and another half percent goes to city. So 1.78 percent altogether.
“Well they’ve now made it a sliding scale,” Gardner said. “If you sell your house at $500,000 or lower, it’s dropped down to 1.1 percent (1.6 percent in the end). The portion between $500,000 and $1.5 million is taxed at the existing rate.”
“Here’s the kicker, it starts ratcheting up above that $1.5 million level,” he said.
Properties sold between $1.5-3 million are taxed at 2.75 percent (3.25 after city tax). Then 3.5 percent for anything sold above $3.5 million. The tax is basically targeting luxury homes and expensive properties.
“In essence, this will not affect 80 percent of homes in Washington state,” Gardner said. “We’re taxing the rich, essentially.”
Commercial property is where things get “really heavy” Gardner said. If an owner of a $50 million apartment building or a hotel sells a property, for example, they would currently be charged about $890,000 in excise taxes. Under the new rate, they would pay $1.72 million.
“So it wouldn’t surprise me if we see some commercial buildings come on the market earlier to try and sell before the deadline,” he said, further noting that King County is already seeing more luxury properties come on the market.
“For most of us, we’ll actually be getting some money back,” he added. “However, the high end of the market, they will be paying significantly more.”