Canberra Liberals promise to cap rates if they win the next election

Rates across Canberra will rise by an average of $172 for houses and $135 for units from July, according to Tuesday's budget. The average Canberra house now pays $2474 in rates, while the average unit pays $1472.

The increases are part of the move to abolish stamp duty in favour of land tax and rates over 20 years, recommended by former Treasury boss Ken Henry in 2010.

The ACT began abolishing inefficient taxes in 2012, cutting insurance taxes, reducing stamp duty year-on-year but raising rates and land tax in exchange.

As such, residential rates will rise 11 per cent to $348.7 million in 2018-19, while land tax will rise 8 per cent to $141.1 million.

The government did announce it would cut stamp duty for first home buyers with a combined income under $160,000 from next July and commercial properties worth up to $1.5 million from this July.

However commercial conveyance revenue is expected to rise to $65 million this coming year, while residential duty revenue will increase to $214.1 million in 2019-20.

Mr Coe told Canberra radio station 2CC the growth in rates was unsustainable.

"Unfortunately because of all the harm that has been done over the six or so years it means even relatively minor rates increases are relatively substantial because they’re working off such a high base," Mr Coe said.

"Back in 2012, 5 per cent of the rates base was much smaller than what 5 per cent of the rates base now, so because there’s this huge base it means even the smallest of percentages is causing real harm and it’s driving people across the border."

Mr Coe went further, accusing the the government  of gouging Canberrans on the price of land by claiming there was a shortage of land, which he deemed "rubbish".

He said land sales revenue had risen from $220 million in 2012 to $580 million, and the government had caused "real long term damage" to the price of land in Canberra.

"Regardless of what people say, there is no land shortage in Canberra. It's so artificial. How can it be in Australia there’s a land shortage, it’s rubbish," Mr Coe said.

"You watch these property shows from overseas, you can watch Escape to the Country in the UK, how is it that land an hour out of London can be cheaper than land in Canberra, it’s absolutely outrageous."

However, Treasurer Andrew Barr said the change in the tax mix was necessary to continue to pay for services in the long run.

"We’re a smaller jurisdiction, we don’t have the wide range of revenue sources that NSW does, we don’t have a mining industry, we don’t have a large agricultural industry, so our only way of rasing revenue is off land," Mr Barr said.

Mr Coe will hand down his budget reply on Thursday.