It’s a stamp duty feast for the NSW Government

By Leith van Onselen

The New South Wales Government continues to make out like bandits from the Sydney property bubble.

With Sydney home prices having risen by over 40% since June 2013 driven by the orgy of investor speculation:

ScreenHunter_10359 Nov. 17 07.01

And the annual number of housing transfers also rising by 31% since June 2013:

ScreenHunter_10361 Nov. 17 07.04

Stamp duty receipts have skyrocketed, jumping by an incredible $2.90 billion (87%) since June 2013 to $6.24 billion as at October 2015:

ScreenHunter_10362 Nov. 17 07.05

As argued each month, the NSW State Government should enjoy the ride while it can. As shown in the next chart, stamp duty is an inherently volatile source of revenue:

ScreenHunter_10363 Nov. 17 07.07

It will very likely peak in the not-to-distant future, given the falling auction clearances:

ScreenHunter_10340 Nov. 15 18.46

And the recent slowing of price growth:

ScreenHunter_10360 Nov. 17 07.01

The post-GFC correction in stamp duty receipts saw a peak-to-trough decline of around 30%. However, given the sheer size of this boom, the Government can expect a much bigger correction in receipts next time around.

If the State Government was prudent, it would begin to transfer the state’s tax base towards a broad-based land tax, which is both more economically efficient and less volatile.

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