2010 Bonus pay on Wall Street is on pace to break a record high for a second consecutive year, according to a study conducted by The Wall Street Journal……so brace yourself for a real estate boost this coming Winter in New York.
About three dozen of the top publicly held securities and investment-services firms—which include banks, investment banks, hedge funds, money-management firms and securities exchanges—are set to pay $144 billion in compensation and benefits this year, a 4% increase from the $139 billion paid out in 2009, according to the survey. Compensation was expected to rise at 26 of the 35 firms. We suspect many of these bonuses will not be cash, but even if they are paid out over extended periods, when the wealthy feel wealthier they spend. This could be great for New York’s economy.
“Huge bonuses usually fuel a very active real estate market in New York,” says Leonard Steinberg, managing director of Prudential Douglas Elliman and publisher of LUXURYLETTER. “I would suggest to anyone wanting to buy an apartment in Manhattan at “2009 PRICES”, to start looking and deciding right now: super-low interest rates, reduced inventory of quality apartments, minimal building, combined with this level of money infusion can lead to only one thing…..rising prices. Already we have seen an uptick in activity: the wealthy are always a few steps ahead of the game. Brace yourself.”
While many bonus recipients already own fabulous apartments and have no need to buy a new one, the confidence boosted by bonuses usually adds momentum to the real estate market. It is often the first time bonus recipient that buys their first apartment, or the ‘rising star’ recipient whose bonus has increased dramatically that decides to upgrade. This fuels transactions.
The benefit to the City and State is two-fold: firstly, substantial taxes are collected on these bonuses……taxes on the bonuses themselves, and then sales taxes on the bonus money used for spending. Every time a $ 1million property sells, about $ 28,000.oo is paid in transfer taxes and mansion taxes alone, not to mention mortgage taxes and sales tax on products needed for moving: movers, new furniture, electronics, etc. This demand also fuels new jobs, that takes welfare and state beneficiaries off the dole.
Yes, we can all be green with envy at these often ridiculous sums of money sometimes paid to people who probably don’t deserve that much money, but we are all the beneficiaries. And to those outside of New York complaining about Wall Street: remember that for every dollar New Yorker’s pay to the Federal government, only about 85cents comes back to the state: so other states are the beneficiary. New York pays almost 12% of all federal taxes collected. Also be reminded that 41% of New Yorkers pay no Federal taxes at all.