The growing reliance of state and local governments on fat property tax revenues generated by the eastern states’ property boom has prompted analysts at CoreLogic to issue a warning – it may be time to consider a more sustainable model.
Research analyst Cameron Kusher said the latest ABS data showed property taxes now accounted for a record 52% of the total taxation revenue collected by state and local governments, up almost 10% on last year.
And stamp duty was the biggest earner, making up $20.6 billion of the total $49.5 billion collected from property.
“It’s pretty easy to see what booming housing markets do for state government coffers, with the NSW and Victorian governments seeing stamp duty revenues surge,’’ Mr Kusher said.
But he warned that this left them exposed to any downturn in activity.
“The uncertainty surrounding stamp duty and its dependence on stock turnover makes it an inefficient and volatile source of taxation revenue.’’
Mr Kusher said apart from stamp duty, $7.2 billion was raised from land taxes and $17 billion from municipal rates.
“Land taxes and municipal rates are much more guaranteed income streams than the more volatile stamp duty on conveyances. For this reason it would make sense to move from stamp duty to a much more efficient, easier to collect and holistic land tax.’’
But he said such moves would likely be resisted in NSW and Victoria as long as they kept raking in the windfalls generated by the current housing boom.
The weekly wrap from CoreLogic:
- Growth in dwelling values eased in April but this trend will have to continue for several consecutive months to confirm whether APRA’s cooling measures have succeeded in taking any heat out of the Sydney and Melbourne markets
- Capital city auction numbers and clearance rates rebounded last week. There were 600 more auctions held, with a resulting 74% clearance rate (up from 69.8% the previous week)
- Melbourne’s clearance rate was 78%; Sydney’s 74%.
- Nationally there was a 6.6% drop in new properties hitting the market in the 28 days to April 30, compared with the same period last year.*
- Sydney and Canberra were the only capital cities to have more newly advertised properties than 12 months ago. All other capitals, apart from Melbourne and Hobart, had at least a 10% drop in the number of new properties coming on the market.
*Seasonal factors that may have influenced results include Easter, school holidays and ANZAC long weekend.