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State governments like to spend money, especially during elections.
New route? You have $ 4 billion. What about this long-promised rail link between the airport and the city? Another few billion.
But the money reserves are dry, and that's because we stopped buying houses.
CoreLogic data shows clean-up rate is at its lowest since December 2012, with homes in many suburbs not sold, their value has dropped 4.3% in the last 12 months from the top reached last September.
The number of sales settled also decreased by 10% nationally, against 18.5% in Sydney and 15.8% in Melbourne. This represents a significant drop in Land Transfer Tax revenues, News.com reported. Tim Lawless, Head of Research at CoreLogic.
"Obviously, there is half as much turnover and less stamp duty," he said.
"This will have an impact on the budgets and revenues of a state government."
While the market was booming, people simply swallowed the costs and continued to buy.
Each established house sold brought tens of thousands of dollars to the state coffers, depending on the cost of the house and the state in which it was located.
But as the market gets colder, not only are prices falling, but, more importantly, sales volume is dropping sharply. And that means there is a lot less money coming in, in the form of stamp duty.
As residents of those states who have used this money, we are about to feel the pain.
WHAT IS THE STAMP DUTY?
The stamp duty is levied on the purchase of existing houses, it is not paid on apartments or houses purchased outside the plan.
First-time homebuyers have also been largely exempt from stamp duty in recent years, the cost of which prevents them from entering the market. But the vast majority of buyers can not avoid the tax.
A $ 1 million home in Victoria, for example, will charge you an additional stamp duty of $ 55,000.
Stamp duty represents a huge percentage of revenue in the states. In Victoria, it is the second largest source of income, just behind the $ 6.3 billion collected from the largest source of income in the state, the wage tax. Falling homes sold will hit everyone hard in this state.
LOOK WEST FOR A HISTORY LESSON
Those in the eastern states do not need to look far to see what happens when the stamp duty is dry.
In the good times (think: the mining boom), WA was flying. House prices were rising rapidly and people were investing. Billions of dollars in stamp duty went to state budgets.
But in the decade since the boom, things have changed dramatically. Housing prices fell 25% from the peak of 2007 and sales volumes fell 17% from the long-term average.
MORE: The words "transmitted" are the two most dangerous words in real estate
MORE: The Worst Suburbs In Australia To Sell Your Auction House
In times of prosperity, the state enjoyed more than $ 2 billion a year in stamp duties.
Ten years later, they only see $ 1.5 billion. Do not forget that we do not adjust to inflation here. Even though the cost of living has gone up, the money the government has to spend has steadily declined.
Washington State Premier Mark McGowan described in 2017 the financial situation of his own state "as the worst since the Great Depression".
And the results on the ground are now being felt, a long-awaited upgrade at the Royal Perth Hospital has been postponed again and Metronet's long-awaited public transit project in Ellenbrook continues to live in limbo.
WHAT CONDITIONS ARE IN DISORDER
Brendan Coates, of the Grattan Institute, told news.com.au that Victoria and NSW had relied too heavily on stamp duty to pay government expenses, which could prove costly given that stamp duty fluctuates enormously every year.
"Victoria and NSW have essentially become dependent on the increase in stamp duty revenues," he said.
He added that the two states "had expected relatively modest price cuts, but the declines were larger than expected by most economists."
Coates said the New South Wales government predicted a 10 percent drop in sales, but current CoreLogic figures indicate the actual decline would be 18 percent. , 5% in Sydney.
Both states have relied heavily on stamp duty to fund major projects in recent decades. But AMP Capital's chief economist, Shane Oliver, says something must yield.
He fears that if the slowdown lasts a long time or worsens more and more, it is difficult to pay for future infrastructure needs.
WHAT IS THE SOLUTION?
But there is a solution to the problem of the volatility of stamp duties and ACT plans to do so in the next 20 years: remove the stamp duty.
A report released last June found that Australia's GDP would reach $ 24.3 billion a year from 2047 if state governments replaced stamp duties with a generalized property tax.
Several Australian states already levy a property tax on commercial properties and second homes, but do not extend it to the family home. The problem is that many people see in the idea of removing the stamp duty a blow – they paid their "fair share" when they bought.
But Brendan Coates said the stamp duty discriminated against people who moved more often to those who stayed at home all their lives.
It is not impossible to set up a property tax, even if voters could fail at the first mention of a new tax.
Several countries, regions and cities around the world have eliminated stamp duties in favor of the property tax.
But at least in Victoria – the state with the highest stamp duty – there is no plan to change the structure of the property tax.
When news.com.au interviewed Victorian Treasurer Tim Pallas, he confirmed "that there is no plan for a broad-based property tax".
As tempting as the long-term gain may be, many Australian politicians are paralyzed by the political reality.
If they propose a tax that will hurt in the short and medium term, voters probably will not accept it, even if they will do much better in the long run.
But the idea might not be gone forever. Just ask John Howard, who convinced the Australians to vote for a GST, just a few years after his party dropped politics after a devastating defeat.
A property tax may be unpopular, but perhaps Australians can still be convinced.
David Ross is a contributor to news.com.au. Follow him on Twitter: @FakeDavidRoss
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