Since the implementation of Measure ULA in April 2023, the luxury real estate market in Los Angeles has experienced significant changes, particularly in affluent areas like Pacific Palisades and Brentwood. The "Mansion Tax" imposes a 4% transfer tax on homes selling between $5 million and $10 million and a 5.5% tax on homes selling for over $10 million. This tax, intended to fund affordable housing and homelessness prevention, has had a substantial impact on high-end home transactions.
Before April 2023, the luxury market saw a rush of activity as sellers hurried to close deals and avoid the looming tax. However, after the tax came into effect, the high-end market cooled considerably. Buyers and sellers alike were forced to reconsider the financial implications of moving forward with transactions, leading to a notable decline in activity.
Based on pre- and post-ULA data, there has been a 50% reduction in transactions for homes priced at $5 million and above, and a 45% decline in homes priced between $5 million and $10 million. This significant drop reflects the heightened financial burden imposed by Measure ULA, with some sellers delaying listings and others lowering asking prices to attract buyers now wary of the extra costs.
For instance, a home selling for $6 million now incurs a $240,000 tax under ULA, while a $10 million home faces a tax of $550,000. These additional costs have led to a pullback in the luxury housing market, particularly for properties in the $5 million to $10 million range.
In Pacific Palisades, the luxury market has seen a pronounced slowdown. Transactions in the $5 million to $10 million range have decreased by nearly 45%, while sales of homes over $10 million have experienced an even sharper decline. Similarly, Brentwood has also been affected with a 50% drop in overall luxury sales, the tax has prompted both buyers and sellers to reconsider their strategies, causing a noticeable cooling in the market.
Measure ULA has had a profound impact on the luxury real estate market in Pacific Palisades and Brentwood. The tax's introduction has led to fewer transactions and a market-wide adjustment in pricing strategies. As both buyers and sellers navigate these new conditions, the luxury housing market will likely continue to adapt to the challenges posed by this new tax. If you are considering buying or selling a home please feel free to contact us to help navigate these new rules regarding real estate transfer taxes and more.