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Show Flat tax not to be feared, I says real estate broker m by Christopher Smart How will the Reagan Administration's Administra-tion's proposed "flat tax" affect the Park City real estate market? Many people are asking that question in light of national publicity surrounding the proposal that could diminish tax deductions on second home mortgages. According to some economists, as well as Park City entrepreneur Randy Fields, the proposal could have a chilling effect on real estate. Put Park City realtor Bob Ziegler, a director of the National Association of Realtors, maintains that Park City has yet to be affected by adverse publicity on the flat tax. He said that according to his national barometers, the parts of the tax plan which could limit investments in real estate will be dropped from any future bill submitted to Congress. But since Park City is largely made up of properties that are geared as vacation homes and investment properties, brokers and agenst continue to be concerned. Park City Councilman Bill Coleman, who owns and operates the local real estate brokerage firm Coleman Land Company, said, "The flat tax could throw the market into confusion and peopoe won't buy until they know what is going on." Coleman's remarks came in a Dec. 13 city council work session: As an outcome of the meeting, the council will lobby Utah's congressional delegation as well as other U.S. Congressmen to kill tax proposals that would diminish investment incentives such as tax deductions on the interest paid on second home mortgages. A housing cost comparison by the National Association of Realtors illustrates the effect the proposal could have on a family of four with a $64,000 annual gross income. In its example the realty association states that .this homeowner with a $150,000 house and a $120,000 mortgage at an interest rate of 13 percent would be substantially affected. The analysis concludes the family would pay an additional $2,800 in federal income taxes if the proposal became law. If tlie same family were renting its home, it would pay aDoui $2,100 less in taxes than it does now. But according to the Wall Street Journal, fear in the housing market could cause offsetting changes. If demand for houses were to drop sharply, the Journal states mortgage rates would be likely to drop along with house prices. This could offset the disappearing tax breaks. If the proposed tax changes were enacted, the price of a $150,000 house would decline nearly $29,000, according to the National Association of Realtors. Nationally, losses could total $300 billion or about 20 percent of all equity held by the country's homeowners. The effect on prices would likely be greatest in areas where the supply of houses exceeds demand, according to the association. Park City currently has a substantial inventory of real estate properties and prices are up, Ziegler said. For example, a condominium in Deer Valley that would have cost $450,000 last year in selling for $600,000 now. A studio at the Park City resort Center that would have sold for $78,000 a year ago is going to $116,000 and a one-bedroom at the Resort Center that sold for $185,000 in 1983 is on today's market for $215,000. Ziegler noted that last year there was also a high inventory in real estate properties. But then, he said, prices dropped and they sold. Referring to the current inventory of real estate, Ziegler said, "You can't be sure the market will absorb those prices." He said the only change in the market mar-ket following the announcement that mortgages could fall prey to the flat tax program is that more cash buyers are now on the scene. Ziegler said that he senses a strong year for real estate sales. "I have not seen many investors that are so concerned that they won't make a move." He added that interest rates have fallen below 14 percent on fixed notes and below 12 percent on adjustable loans. The proposed flat tax will not be acted on by the U.S. Congress until 1986 at the earliest, Ziegler said. By that time, he maintains, the portions dealing with deletion of investment incentives may have been dropped. That proposal has been met with a great deal of opposition across the country, he said. Real Estate will continue to be one of the best investments, Ziegler contended. |
