Foreigners face higher property taxes in Australia's second city

[VICTORIA] The Australian state of Victoria will more than double a property tax for foreign buyers in a move that may undermine surging home prices in the nation's second-largest city.

The stamp duty surcharge will increase to 7 per cent from 3 per cent and will apply to contracts signed on or after July 1, according to a statement Friday from state Treasurer Tim Pallas. The state government said it will also increase a land surcharge on absentee owners to 1.5 per cent from 0.5 per cent.

"It's only fair that foreign buyers of residential real estate, who enjoy the capital growth as a result of Victoria's livability and the amenity of our cities, contribute to the maintenance of government services and infrastructure," Mr Pallas said in a statement. Foreign buyers don't pay other taxes such as payroll and the goods and services tax, known as GST.

Melbourne home values rose 9.8 per cent in the past year, according to data from research firm CoreLogic Inc. Since capital city home values troughed in May 2012, Melbourne dwelling values surged 36 per cent, only trailing Sydney. Overseas buyers, including Chinese investors, have supported demand in Australia's largest cities.

BLOOMBERG