Western Australia’s robust non-residential property market has delivered a tax windfall to the state government, although rising costs have partially offset the gains, according to the government’s mid-year budget review.
Stronger than expected property market activity, particularly in the non-residential sector, has provided a $528 million boost to stamp duty on conveyances, making up more than half of the total increase in tax revenue ($841 million).
To date, both the volume and value of non-residential sales have been higher than expected.
In the residential market, a predicted 10 per cent decline in turnover of stock during 2007-08 has been revised, with price and volume levels now expected to match those of the previous financial year.
The contraction in housing investment that was forecast in this year’s budget has also been revised up, from 2.5 per cent to 1.75 per cent.
Meanwhile, residential building activity in 2008-09 is forecast to decline by 0.25 per cent, up from an estimate of 1.5 per cent.
However, high tax revenue estimates for future years have been reassessed, due to an expected gradual return to ‘normal’ property trends in 2008-09, with building approvals and residential commencements trending down.
Increased tax revenue has coincided with a $353 million increase in costs for the government’s capital works program, totalling $1.4 billion across the forward estimates period to 2010-11.
Net capital works spending in 2007-08 is expected to be $304 million higher than in the budget, incorporating an extra $18 million for the Department of Housing and Works to offset tendering costs for the Perth Arena.
The department has also incurred higher costs for its building and maintenance program, which services other government agencies, and will require an additional $71 million to service costs for contract labour and materials.
Other increases in capital spending included an extra $91 million over three years for the Perry Lakes redevelopment, due to timing changes and increased costs, as well as a $353 million safety net for building costs, to be delivered over the four years to 2010-11.
The review also pointed to increased land acquisition costs for the Department of Education and Training.
Revenue from public corporations is also up, by $36 million, boosted by higher developers’ contributions to the Water Corporation in particular.
