NSW residential transaction volumes forecast to rebound strongly from the middle of 2019: NSW state budget

NSW residential transaction volumes forecast to rebound strongly from the middle of 2019: NSW state budget
NSW residential transaction volumes forecast to rebound strongly from the middle of 2019: NSW state budget

The volatility of transfer duty revenue has proved a significant fiscal challenge for New South Wales. 

During the property market boom, transfer duty grew to be the State’s largest tax, representing 31 percent of tax revenue in 2016-17.

The decline in the property market over the past 18 months has seen forecast transfer duty fall to 21 per cent of tax revenue in 2019-20. 

Since the 2017-18 Budget, the four-year forecast for transfer duty has been reduced by $10.6 billion. 

Residential transfer duty is expected to grow at an average annual rate of 8.8 per cent over the four years to 2022-23. 

The NSW Treasury forecast is largely driven by the expected return to average transaction volumes. 

“As interest rate cuts and relaxed credit restrictions flow through into increased lending, residential transaction volumes are forecast to rebound strongly from the middle of 2019.

“Price growth, however, is expected to be restrained during the forecast period, largely keeping pace with inflation.”

New South Wales become more reliant on transfer duties in recent years, which rose from $3.8 billion in 2011-12 to $9.7 billion at its peak in 2016- 17. 

Since the 2017-18 Budget a softening of the housing market has resulted in a write down of more than $10 billion in forecast transfer duty. 

Land tax too has been revised down following a lower 2017-18 outcome than expected at Budget, along with lower than expected foreign investor land tax surcharge revenue. 

Non-residential construction activity is expected to partially offset falls in dwelling construction over the next two years. 

The public sector will be a major driver, assisted by the State’s record $93.0 billion capital spending program over the next four years. 

The large public infrastructure program, rising commercial building activity and a solid export sector are forecast to underpin the State’s resilience and are expected to partially offset the weakness in the household sector. 

The budget papers noted transfer duty makes up about 8.2 per cent of forecast 2019-20 general government sector revenue and a delay in the forecast residential property recovery, or a less robust return to growth, could detract from the State’s budget result. 

Transfer duty revenue is expected to be $7.4 billion in 2018-19, $173.0 million lower than forecast at the 2019 Pre-election Budget Update. 

From 1 July 2019 home buyers will benefit with the previously announced annual indexation of transfer duty thresholds to the Sydney Consumer Price Index. 

The measure is estimated to save homebuyers around $330 on an average-priced dwelling purchased by 2021-2. 

Transfer duty brackets had not changed since 1986. 

Budget surpluses are being maintained despite the State facing revenue pressures.

Jonathan Chancellor

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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