The NSW government has announced a 2019-20 budget surplus of $702 million in its mid-year economic review, down from a forecast a surplus of $1.016 billion in the June budget. The government expects surpluses to average $1.9 billion over the next four years, with stamp duty revenue being boosted by a rebound in Sydney’s housing market:
Our State’s financial position remains strong with a surplus of $702 million now forecast in 2019-20 (down by $314 million since the Budget) and average surpluses of $1.9 billion across the next four years (up from $1.7 billion).
…this Half-Yearly Review has forecast transfer duty revenue of $7.5 billion in 2019-20, up from $6.9 billion.
The budget paper notes that state earns around $60 million for every 1% in dwelling prices, and another $50 million for every 1% increase in the volume of houses sold. It also notes the strong rebound in Sydney’s property market:
After a period of declining house prices, the median Sydney house price has rebounded and risen by 8.2 per cent in just six months (May to November 2019). This turnaround in housing prices has been accompanied by a strong rise in the auction clearance rate in Sydney, as well as a pick up in the value of new housing finance commitments. Housing turnover (the number of properties sold) is similarly picking up, although it currently remains well below its historical average per capita. The increase in property transactions is important because it will flow through to the ‘ownership transfer costs’ component of GSP. Ownership transfer costs should make a positive contribution to the State’s economic growth in 2019-20, having detracted 0.4 percentage points from growth in 2018-19.
The turnaround in the housing market has been supported by a number of factors including lower interest rates (see Chart 2.9), the easing of uncertainty in relation to housing tax arrangements following the Federal election, and the Australian Prudential Regulation Authority lowering the minimum mortgage serviceability requirement for new lending. Home buyer sentiment has also improved, with house price expectations increasing markedly since May 2019.
Not surprisingly then, NSW’s stamp duty projections have been revised up from this in the May Budget:
To this in today’s Half-Year Review:
With stamp duty receipts upgraded by nearly $4 billion over the forward estimates: