The ACT government will increase land tax for foreign investors in this year's budget, to "rebalance" the market for local buyers, ACT Chief Minister Andrew Barr says.
Starting July 1, foreign investors in the ACT will pay an extra 0.75 per cent on the average unimproved value of residential properties in the ACT.
It comes after the territory government hiked the land tax for investment units and broadened the tax to cover owners who left their property vacant for a certain period in last year's budget.
The extra charge is expected to raise about $4 million over the next two years.
The surcharge, which is included in the upcoming ACT Budget Review, is said to be one of a suite of measures the government will introduce to help local home buyers.
"The ACT government is implementing these changes to help rebalance the housing market in favour of local buyers," Mr Barr said.
"The charge will only apply to foreign investors. ACT and Australian residents will not pay the new charge, and neither will homeowners who live in their property."
All Australian jurisdictions, bar the ACT and Northern Territory, now have a surcharge for foreign buyers.
Foreign buyers also have to pay an application fee of at least $5000 to the Foreign Investment Review Board.
Victoria became the first state to apply a stamp duty surcharge to foreign buyers of residential property in July 2015.
NSW applies the highest surcharge at 8 per cent.
This adds about $91,000 in transaction taxes to the price of a typical Sydney unit.
Victoria and South Australia charge an extra 7 per cent and there is a push in Queensland to bump their surcharge up from 3 per cent to 7 per cent too.
A 4 per cent stamp duty surcharge will apply in Western Australia from January 2019.
The latest quarterly research from ANZ and the Property Council showed foreign investment in the ACT fell in the year to December 2017, from 17 per cent of sales in December 2016 to 11.9 per cent in December 2017.
And the Housing Industry Association's most recent report on stamp duty warned greater restrictions on foreign buyers would result in fewer new homes built each year.
"This has serious ramifications for the likelihood of our long term housing needs being met as Australia requires around 185,000 new homes each year and this volume of yearly output has been achieved on only a handful of occasions in the past," the report said.
"Most foreign-owned dwellings end up being made available to rental markets around the country. This is an important function at a time when vacancy rates are so low in major cities like Sydney and Melbourne - punitive rates of stamp duty for foreign investors risk undermining the effective functioning of rental markets."
However analysis from the Australian National University last year showed Canberra had the biggest oversupply of housing of any jurisdiction other than the Northern Territory, with 6700 more homes than population demands.
Despite this, the ACT government has also come under increasing pressure to act on the high price of housing.
Data from Core Logic showed the median price of a house in Canberra was $669,642, while the median cost of a unit was $431,048, making the ACT the third most expensive place to buy in the country.
Canberra has also been ranked one of the worst cities to rent in for low-income earners and one in five private renters in Canberra who receive Commonwealth rent assistance are spending more than half their income on rent, despite the subsidy.