Vic stamp duty, land tax up for foreigners

Foreign buyers in Victoria will pay more stamp duty on residential real estate and higher land tax with the state government hiking its charges to raise $500 million over four years.

Treasurer Tim Pallas says next week's budget will increase the stamp duty surcharge for foreign buyers from three to seven per cent, and the land tax surcharge for absentee owners from 0.5 to 1.5 per cent.

"This is about making sure that everybody pays their fair share," Mr Pallas told reporters on Friday.

"That additional payment will go to building the schools, hospitals, roads and pubic transport connections that everybody can come to enjoy, and will preserve the amenity of the state."

The treasurer said since the surcharges were first introduced in last year's budget, there'd been "no adverse affect on demand in the property market".

Indeed, the level of foreign investment in Victoria - and particularly Melbourne - had continued to grow "quite considerably", Mr Pallas said.

But the opposition insists locals will be the ones to pay.

"Victorian renters will be paying the cost," opposition treasury spokesman Michael O'Brien told reporters, arguing the hike would be passed on to tenants.

"This is a tax that won't be paid for by foreign investors."

A Property Council of Australia state director, Asher Judah, believes the Victorian government has surrendered Melbourne's competitive investment edge to Sydney.

"This is a bad day for the Victorian property industry," he told AAP.

"Not one other state in this country has these surcharges. It sends a terrible message internationally."