On Monday, I showed how the Victorian State Budget is likely to get hit hard from declining stamp duty receipts as house prices and transaction volumes fall.
Thanks to reader aushousingcrash, I was able to source some interesting data on Western Australian (WA) housing transaction volumes which, when combined with falling home prices, paints a similar picture for the WA State Budget.
According to the below chart from the Housing Industry Association (HIA), the WA Government was the most reliant on property taxation in 2005-06, with property-related taxes comprising around 45% of state revenues:
This situation appears to have changed somewhat, with the proportion of taxes from property falling significantly over the past five years:
WA’s revenues from stamp duties and land taxes – the two major taxes levied on property -peaked in 2007-08 at nearly $2.7 billion, up from only $600 million in 1998-99. Property tax receipts have since collapsed, falling to around $1.7 billion in 2010-11, with stamp duties accounting for all of the fall (see below chart).
However, the WA Government expects property taxes to recover in the years ahead, with property receipts forecast to increase steadily each year, reaching $2.7 billion in 2014-15 on the back of rising stamp duties.
The below chart provides the main reasons for the peak and subsequent decline in WA’s stamp duties:
As you can see, the boom revenue period of 2006 to 2008 corresponded to a period of relatively strong transaction volumes and high prices. However, the revenue situation reversed in 2010-11 through a combination of falling prices, lower transaction volumes, and stamp duty relief introduced a few years prior.
Based on current data, the WA Government’s forecast of rising property tax receipts over the next four years appears ambitious. Not only are home prices continuing to slide and transactions remain near GFC lows, but WA housing finance commitments remain sluggish:
All up, the data suggests that WA Budget revenues will remain under pressure. It also highlights why it is risky for a Government to pin its financial well being on a volatile transactions-based tax like stamp duty, instead of more efficient, equitable and stable sources like a broad-based land tax.
P.S. I would be grateful for reader’s assistance in locating similar transactions data for the other states, in particular Queensland, New South Wales, and South Australia.