Property downturn is worse than it looks

PHOTO: Sales of houses and apartments in NSW were 40 per cent lower in January than a year earlier.

The property downturn has triggered a stamp duty collapse in NSW that could force a big cut in the state’s hard-won budget surplus.

The Royal Bank of Canada predicted on Monday that the NSW Coalition government will have to cut its stamp duty forecast by $600 million this financial year, an amount that would almost halve the surplus.

“I don’t think it’s a particularly big call,” said Robert Thomson, an economist at RBC Capital Markets. “For them to get back on the budget track, that would be heroic.”

The last state budget update forecast house and apartment sales would fall 15 per cent this financial year by volume. So far, sales have fallen about 26 per cent. In January, sales were 40 per cent lower than in the year-earlier month, RBC Capital Markets said.

A big drop in the number of sales suggests the property market is even weaker than indicated by the 10 per cent fall in Sydney home prices over the past year calculated by research firm CoreLogic.