SYDNEY'S merchant bankers have stopped upgrading their prestige homes - sales volume is down by almost half in Mosman, Bellevue Hill, Palm Beach and Vaucluse.

Their inactivity has triggered a bigger slump in stamp duty revenue than the former treasurer, Michael Costa, forecast in his June budget.

The departing treasurer estimated last week that the shortfall in stamp duty revenues was about $180 million during the first two months of the current financial year.

There have been about 70 reported sales above $3 million since the June budget, according to Australian Property Monitors, compared with about 250 sales in the same period last year.

There have been 320 house and unit sales above $3 million across Sydney's affluent suburbs in the first eight months of this year, compared with about 600 in the corresponding period last year.

The steep decline in luxury property sales has occurred in the wake of last year's subprime credit crunch. It added to the earlier sales volume decline across Sydney's mortgage belt suburbs where activity fell after 10 interest rate increases.

The slowing of revenues was expected to persist through 2008-09, with transfer duty growth only returning to trend levels in 2009-10, the June budget papers said.

The budget estimated a 5 per cent fall in the number of properties changing hands during the current financial year.

The budget estimated stamp duty revenue would ease to $3.8 billion this financial year, down from $4.1 billion last financial year. Stamp duty was expected to raise about 20 per cent of total tax revenue.

Mosman highlights the market's inactivity with fewer sellers and even fewer buyers.

It arose as the impact of the year-old subprime credit crunch prompted less liquidity and more job insecurity.

There have been about 50 sales above $3 million in Mosman this year. There were 95 in the same period last year with another 50 sales in the final three months taking the total to 145 sales.