Western Australian Treasurer and Attorney-General Christian Porter says a flat housing market has cost the state government an estimated $836 million in projected stamp duty over the next four years.
In his budget speech to Parliament he said “transfer duty forecasts in this budget have been revised down by $836 million, reflecting ongoing weakness in the housing market”.
Porter told Fairfax Media house buyers were waiting for the market to bottom out.
“You would hope that it would improve, but right now there is not movement,” he said.
“Buyers still think that the bubble that burst after 2005 and 2006’s extraordinary growth has not yet quite reached the bottom.”
Budget papers show transfer duty was about $1.2 billion for both 2010-11 and 2011-12, a figure expected to go up 17.7% to $1.45 billion for 2012-13. The government predicts a 17.7% rise to $1.45 billion next year, with the start of a recovery in the market.
The budget Porter presented says transfer volumes has been low in recent years but is expected to improve.
“Housing transfer duty has suffered from weak established housing transaction volumes and house prices in recent years, with average monthly transactions since 2008-09 around 35% lower than the previous four years.”
“However, transfer duty is expected to improve over coming years in line with a forecast recovery in housing demand.”
In the budget, Porter concedes the estimate for actual income from stamp duty may change.
“Property transactions are highly susceptible to fluctuations in market sentiment and are therefore highly volatile and difficult to forecast.”
“The current transfer duty forecasts are balanced against the risk of continued weakness in the housing market and the risk that market sentiment could quickly change and cause a faster than expected recovery in transaction volumes,” he says.
In the budget he says property transaction volumes are expected to improve along with a modest increase in residential property prices.
“Transaction volumes are expected to move toward a long-run trend over the forecast period, while residential property prices are forecast to increase at a modest rate broadly in line with the expected growth in incomes (of around 5-6% per annum).”
Porter expects in four years, transfer duties will be at lower levels than before the global financial crisis.
Despite the fall in revenue Porter has kept stamp duty concessions for first-home buyers. The concession waives duty on properties under $500,000.
REIWA president David Airey says the concession is needed to support the housing market. He says first-time buyers are one of the few groups active in the current market.
“I’m pleased to see the government has retained its stamp duty concession for first-home buyers, because this has been successful in maintaining first-home buyers at around 25 to 27% of the market over the past 12 months,” he says.
“The importance of the stamp duty concession for first home-buyers in the modest market recovery currently being experienced cannot be underestimated.
“REIWA analysis of the budget papers indicates that, as usual, property buyers will carry much of the burden of the shortfall in GST revenues as the government, by not indexing thresholds, reaps the windfall gain from projected price and sales volume increases.”
He says he is disappointed there are no stamp duty concessions for older citizens looking to downsize their housing, saying it’s a lost opportunity to free up housing capacity at a time when supply is tight.
He says the Perth rental market is under enormous pressure caused by a growing population, low vacancy rates and increasing rents.
The government has committed $130 million towards construction of social housing dwellings over the next two years.
Western Australian Council of Social Services CEO Irina Cattalini welcomed the construction investment but says it falls short of demand.
"While the housing initiatives are welcome, the overall investment in social housing will not do enough to reduce the time people are stuck on the social housing waiting list – which has grown from 113 weeks last financial year and will continue to increase to 134 weeks in 2012-13," Cattalini told Perth Now.