In last week’s article, Housing slide to hit Victorian Budget, I posted a series of charts showing how Victorian housing transaction volumes have slumped:
And how the number of mortgages lodged has, for the first time in a decade, fallen behind the number of mortgages discharged:
The implications of this analysis was that the falling debt issuance is likely to further depress Victorian home prices which, when combined with falling transaction volumes, is likely to significantly reduce stamp duty receipts for the Victorian Government, and could ultimately lead to sharp falls in home construction – a key pillar of employment for the Victorian economy.
When undertaking this analysis last week, I was unaware of just how reliant the Victorian Government had become on property-related taxes. The below chart, which has been extracted from the Victorian Budget Papers, shows the massive growth of stamp duty and land tax receipts since 1996-97:
Incredibly, Victorian property tax receipts increased by four-fold between 1997-98 to 2010-11 – from a low of $1.3 billion to $5.3 billion – and, after a small projected drop in 2011-12, are expected to continue their upward trend into the forward estimates, where they are projected to peak at nearly $6 billion in 2014-15.
Stamp duties and land taxes currently contribute just over one-third of Victorian Government tax receipts:
And the growth of these taxes has helped to offset corresponding strong growth in government employee salaries:
But with Melbourne home prices on the slide:
Stock on market surging:
Victorian home construction levels elevated:
And debt issuance subdued, the Victorian Government’s forecast of steadily increasing property tax receipts is optimistic.
Expect big revenue downgrades in the lead-up to next year’s state budget.
