Stamp rollover
Stamp duty held up at $21.7 billion in 2017-18 up from only $12.8 billion five years earlier, according to the latest ABS statistics on Taxation Revenue.
This was mainly thanks to Victoria, where transactions were still firing through 2017-18 on booming population growth.
Melbourne came to its property downturn later than Sydney, which was already well into its decline by 2017-18.
Since that time housing market transactions have been in freefall, and so too have stamp duty receipts, especially in New South Wales.
Victoria's state budget will also take material write-downs on stamp duty.
Stamp duty is an impediment to social and labour force mobility, but at least it's only levied once instead of every year.
Land taxes and rates are levied each and every year and are often based upon arbitrary valuations, which miraculously seem to rise every year regardless of market conditions.
Land taxes and municipal rates continued to mushroom to $30.3 billion, to be up by 39 per cent from five years earlier.
The taxes raised from property will never be 'enough', though, which does leave property investors exposed to tax grabs.
Don't forget land values are a stock; the $30 billion in taxes and rates is a flow, which is levied every year (and apparently always rises).
Turnover collapses
It's hard to get an accurate real-time reading on transaction volumes in the housing market.
But based upon all available indicators the established housing market annual turnover has sunk as low as we've ever seen it, now tracking at about 4 per cent.
But based upon all available indicators the established housing market annual turnover has sunk as low as we've ever seen it, now tracking at about 4 per cent.
There is spirited support of macroprudential tools such as larger deposit requirements, forced amortisation of loans, and especially the high minimum floor assessment rates on loans.
Each of these measures has, after all, been supremely effective in removing the speculative heat from the market, if not too effective.
Distortions and resilience to shocks
There's another side to the story, though, which is becoming increasingly apparent as the Australian economy has essentially stalled over the past 9 months.
International experience, including in Sweden, suggests that macroprudential measures can also create other distortions.
These include reduced consumption due to over-saving for deposits (or amortisation of loans), reduced construction activity, and locking out low income earners from purchasing property entirely.
Moreover, the reduced turnover in the established housing market consequently stunts social and labour force mobility, which has adverse implications for productivity.
Moreover, the reduced turnover in the established housing market consequently stunts social and labour force mobility, which has adverse implications for productivity.
There can also be a lack of diversification as high deposit requirements and forced amortisation tie up all of an individual's savings into illiquid housing equity.
Perversely, therefore, tighter lending standards can reduce the resilience of mortgagors to shocks for many years to come, even if there are benefits initially.
No-one disputes how effective the tighter lending standards have been, but now we have a range of markedly different mortgage lending rates across a range of different products, and arguably we're now seeing elements of all these distortions in Australia too.
An interest rate buffer of 250 basis points would be a better way to go.
An interest rate buffer of 250 basis points would be a better way to go.
