Housing data
Largest fall in dwelling transactions in more than a decade
The gross value of real estate transactions fell by just over 18 percent over the 2010/11 financial year, the largest fall in the value of real estate sales for at least ten years.
What does this mean for you? Read our opinion here:
The total value of dwelling sales over the 2010-11 financial year equated to $193.5 billion. Although this sounds impressive, the total value was the lowest over a financial year since 2008/09 and the total value fell by -18.2% from the previous financial year.
The results indicate that transaction volumes have consistently been the main driver of the total value of sales, however in more recent times the value at which properties are transacting has become just as important. This is demonstrated by the fact that the annual number of home sales is back at levels not seen since June 1997 while the total value of sales remains slightly higher than what was recorded during the depths of the GFC.
This is important for property professionals to understand. Falling home values have not historically been accompanied by such large falls in transaction volumes. Today’s market is characterised by a modest fall in home values (down 2.1% over the financial year) and more importantly, a significant decline in transaction volumes.
As reported in our Property Pulse earlier this year, state and local governments are heavily reliant on property transactions as a source of revenue. Stamp duty, council rates and land tax are calculated off either the unimproved value of the land or the value of the transaction. With the total value of sales down -18.2% over the 2010-11 financial year, there is going to be a substantial hole in state and local government budgets.
The -18.2% decline in the total value of dwelling sales nationally is the largest financial year fall recorded across the years highlighted, more severe than the downturn in 2008-09 (although the total value of residential home sales fell lower between the 12 months to October 2008 and the 12 months to May 2009 during the GFC). In each state except for New South Wales the decline (or growth) was the slowest recorded.
Given the marked decline in the total value of sales, you can expect that state and local governments will look to find other ways to raise revenue. The Queensland Government has already slashed stamp duty concessions for owner occupiers which adds approximately $6,575 in costs to purchase but is likely to provide a revenue boost for the State Government. Of course the Henry Tax Review suggests that we should look to a blanket land tax rather than relying on stamp duty. If Government was to choose this method of taxation the volume and value of transactions would have much less of a bearing on Government revenue than it currently does.
