If property sales volumes and/or prices generally are both down between 5% – 10% from 2024-25 to 2026 -27, stamp duty revenue could leave up to a $2.5 billion hole in the budget estimates.
Over the last six years stamp duty revenue to the Victorian Government has ranged from $6.14 billion to $10.36 billion. In 2024-25, Victoria collected $9.25 billion in stamp duty.
If you add land tax and the other property related taxes and levies, property has become the most important single revenue source available to the state. Land tax alone raised $6.12 billion in 2024-25.
If we add all property taxes such as stamp duty. land tax, the landholdings component of the COVID debt levy, the fire services property levy and congestion levy, property taxes comprise about 45% of all Victorian state tax revenue.
Needless to say, the ability of the State Government to deliver on its budgeted spending relies heavily on a buoyant property market generally.
Here are some very quick and dirty numbers.
2024-25 actual stamp duty: $9.25 billion
We don’t yet have the final 2025-26 numbers, but if transaction volumes and average property values, both fall by 5% to 10% from the 2024 – 25 year, to 2026 – 27 year, stamp duty revenue would fall to potentially $7.5 billion. We don’t suggest they will, but this a risk for the State Government.
The current 2026-27 Budget was released in May 2026 and continues to rely heavily on property tax revenue, including land transfer duty (stamp duty) and land tax. The budgeted revenue from just stamp duty is $10.0 billion.
In the above 5% – 10% value and volume fall scenario, the shortfall in stamp duty revenue to the budget forcast would be up to $2.5 billion.
There are plenty of assumptions in those numbers. Stamp duty is progressive, so a 10% fall in property prices does not necessarily produce exactly a 10% fall in duty per transaction. The mix of sales matters as well. A slowdown concentrated in high value properties makes it worse. A drop in the sale of $3 million homes and major commercial transactions hurts stamp duty revenue far more than the same percentage fall in lower-priced properties.
Importantly, transaction volumes may matter even more than prices.
A property that sells for 10% less still generates stamp duty. A property that does not sell at all generates none.
That makes turnover critical.
Clearly a weakening market produces a double hit. Fewer properties change hands, while those that do transact sell for less. Commercial, retail and industrial markets are important to these numbers as well. This is not simply a story about Melbourne house prices. Those markets (especially the commercial office market) will be well down.
Then there is the timing problem for the government.
Property markets can turn relatively quickly. Government expenditure cannot.
Schools and Hospitals all need to operate. Interest on State debt still needs to be serviced. If a volatile revenue source suddenly produces $1 billion or $2 billion less than forecast, expenditure does not automatically fall by the same amount.
That leaves three broad possibilities. The government needs to
- finds additional revenue (more tax)
- reduce expenditure, or
- borrow more.
Or some combination of all three.
This is one of the less discussed weaknesses of stamp duty and property tax generally as a revenue source. Another is that by disincentivising investors, there is less investment property so there is less land tax collected.
For years economists and tax system reviews have criticised stamp duty. It has been bemoaned due to the way it discourages free flow of the population for better productivity, allocation of resources and even for being prejudicial. Someone considering downsizing, moving closer to work or changing homes faces a large tax bill simply for moving home which would be better for all.
The tax therefore potentially reduces the very activity on which the State depends for the revenue.
The higher the transaction costs, the greater the disincentive to transact. The fewer transactions that occur, the less stamp duty the government receives.
When the property market slows and turns down, the exposure to the risk becomes obvious.
In 2021-22 Victoria collected $10.36 billion in stamp duty. Two years later it was down to $8.43 billion. That is a shortfall of nearly $2 billion despite the State still needing to fund broadly the same essential services.
