NSW/VIC caught in stamp duty doom loop

By Leith van Onselen

The epic stamp duty bust coming to NSW and VIC is finally in the public spotlight, as both dwelling values and transaction volumes plummet:

David Ross from News.com.au has sounded the alarm:

STATE governments love splashing the cash, especially at election time.

New road? There’s $4 billion to you. What about that long-promised rail link between the airport and the city? Another few billion.

But the well of cash is running dry, and it’s all because we’ve stopped buying houses…

Stamp Duty is a huge percentage of revenue in the states. In Victoria, it’s the second largest source of income, just shy of the $6.3 billion collected from the state’s biggest source of income, payroll tax. The fall in houses sold will hit everyone in that state hard…

The Grattan Institute’s Brendan Coates told news.com.au that Victoria and NSW had relied too heavily on stamp duty to pay for government expenditure, which could prove costly as stamp duty moved around so much each year.

“Victoria and NSW have essentially become addicted to rising stamp duty revenues,” he said.

He added the two states had been “forecasting relatively modest declines in prices, but the declines have been larger than what most economists expected.”

Mr Coates said the NSW government had predicted a turnover decline in the order of 10 per cent, but current CoreLogic figures show the real decline to be 18.5 per cent in Sydney.

Both states have relied heavily on stamp duty to pay for big projects over recent decades. But AMP Capital’s Chief Economist Shane Oliver says something has to give.

He’s worried that if the downturn runs long or grows deeper then paying for the infrastructure needs of the future was in doubt.

Ross Elliott has also warned that NSW and VIC are most at risk:

NSW is going to feel the pain. Its last State Budget announced a raft of infrastructure projects which had the country weeping in envy. Their stamp duty revenues alone grew from $4billion per annum in 2011-12 to $9billion in 2016-17. Property tax dependency also grew – from around a third to nearly 45% in the same period. A sustained fall in sales volumes combined with a fall in prices could see $3billion per annum wiped from future state revenues.

Victoria doesn’t fare much better. With both stamp duties and land taxes steadily climbing, their annual revenues have swelled by over $3billion per annum. Their property tax dependency has grown from around a third to over 45% of all income. Nearly one in two state tax dollars comes from property. That’s going to take some delicate fiscal balancing if revenues fall on the back of a slowing property market.

Both states have ridiculously optimistic forecasts for stamp duty revenue (see red bars below):

However, WA offers a valuable insight about how far stamp duties could fall, given it has experienced a prolonged housing slump:

Actual stamp duty receipts peaked in WA in 2007-08 at $2,243 million, but have slumped to $1,497 as at 2016-17 – a 33% decrease (obviously much worse after inflation):

Applying the same kind of correction to NSW and VIC implies a revenue decline of around $3 billion per annum in NSW and $2 billion in VIC.

Goodbye fiscal spending, hello austerity.

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Leith van Onselen


  1. «Goodbye fiscal spending, hello austerity.»

    Yep – fewer schools and hospitals and libraries around the new estates. Amenity even lower than might have been expected. Luckily the inner suburbs have their infrastructure already, so the important people are looked after!

    • Yup. I think people were willing to overlook clearly inappropriate quality and quantity of immigration when their house was valuable and getting more valuable.

      With houses so-so, and negative gearing and CGT going soon thanks to Labour, immigration will come under a lot more pressure – we’re screwing our country for what?

      Already the mood is changing on places like Reddit, where calm and clearly reasoned arguments to limit immigration in response to worsening conditions for Aussies workers are getting upvoted.

      • Look at dr liz’s Twitter feed, they lap up the stuff about the maggots and the chicken, total spaceheads.

    • Peach, we have a government with 9 billion from the sale of the port of Melbourne to spend on our sponsors the CFMEU. It will take us a while to burn through all that cash. Now for selling the Titles office…

      • Exactly … this requires innovation. What else can we sell off … think innovatively and find me something to sell!

      • @jc2610: NSW government is more innovative. They are demolishing two perfectly good stadiums and replacing them with similar ones at a cost of $2 billion. That’s a lot of schools and hospitals.

      • Fitz, which is larger, the contractor (CIMIC, etc) profits shifted off-shore tax effectively or higher worker payments (20-30 % of contract costs) which are taxed and spent in Australia?

        I thought the new work was done after competitive bidding?

        What are the effective tax rates for Transurban and Syd airport?

    • And “hello 15/20%” GST probably. Also, lots of other taxes to boot. My garden wast wasn’t picked up last week so I took it down to the tip and was charged $23. The lady said I could call the council, but it’d be a wasted call. It’s not a tax, but you’ll pay.

    • Strange Economics ..MEMBER

      So drop in stamp duty (and transaction numbers – now theres no money for the “congestion busting” and infrastructure that was going to cater for the population increase that has already arrived? Sydney and Melbourne need double the infrastructure to be built, and stamp duty was the fund.

    • You mean the inner-city lefty voters who generally favour substantial investment in schools, hospitals and other infrastructure ?

    • “Luckily the inner suburbs have their infrastructure already, so the important people are looked after!”

      And the inner suburbs residents have paid for that amenity via the much higher purchase prices of their residences. Which means they pay more stamp duty etc etc.

  2. A NSW Government Freedom of Information request might be well timed.

    Then we could examine exactly what categories of land transactions generating Stamp Duty have crashed the most.

    The people of NSW might be disturbed to know to what extent the states finances were built on a foundation of selling off NSW residential housing to foreign buyers and temporary residents.

    Here is a list of the information that should be released by NSW revenue and the LTO each and every month.

    (a) The number and value of new homes and apartments bought by Foreign buyers (Offshore)

    (b) The number and value of existing homes and apartments bought and sold by Foreign buyers (Offshore) with approval of the Foreign Investment Review Board (FIRB).

    (c) The number and value of new homes and apartments bought by Foreign buyers (Temporary residents)

    (d) The number and value of existing homes and apartments bought and sold by Foreign buyers (Temporary resident) with approval of FIRB.

    (e) The number and value of new homes and apartments bought by Foreign buyers (Permanent residents)

    (f) The number and value of existing homes and apartments sold by Foreigners (Permanent residents)

    (g) The amount of surcharge stamp duty and surcharge land tax paid by foreign buyers (all categories) and foreign owners of property

    The information is being collected as a routine matter and should be released as a routine matter on a regular basis just as it was for July, August and September in 2016 before the NSW government decided it was better to keep the people of NSW in the dark about how much residential real estate NEW and EXISTING was being flogged off to foreign buyers


    Here is an amusing promotional video for Parramatta.

    The tour buses are a bit thin on the ground in recent times


  3. ErmingtonPlumbingMEMBER

    Labor winning the upcoming NSW State and Federal elections is going to be quite the poisoned chalice me thinks.

    • NSW will be close, and I get the sense the Libs ahead.

      Do the ALP even have a leader at the moment? Foley in a bit of a harassment pickle which will be certain to rolled out in the election campaign. They need to get their house in order if they are serious. Daley doesn’t come across as a great communicator. Jodi Mckay does and would match well v Gladys.

    • Strange EconomicsMEMBER

      Land tax would be massive on people who bought in the leafy suburbs 20 years ago and now house is 2 million. Baby boomers retiring and getting pension as own home excluded from asset test would be horrified. There will be street protests in Woollahra and Toorak…