Foreign property investors are shifting their focus away from Victoria after several government policy changes which experts say could lead to a slowdown in the economy.

Many China-based businesses that only sold Australian properties have already closed, while some are diversifying their businesses by selling other countries' real estate.

In the past two years alone, the Victorian government introduced a 3 per cent stamp duty surcharge for foreign buyers and then more than doubled it to 7 per cent. The axing of stamp duty concession for off-the-plan properties from July 1 for investors will increase taxes further.

A busy construction sector has been a major driver of the economy, but continuous changes in rules are set to deter the very investors who help to get developments off the ground.

Photo: Dominic Lorrimer

Property Council of Australia executive director, Victoria, Sally Capp said off-the-plan investors played a pivotal role in making projects financially viable for banks to fund construction, and reduced demand would impact supply and make homes more expensive.

Although first-home buyers would be exempt from stamp duty for budget properties, they tend to buy when the apartment was built, Ms Capp said, so they may not replace the investors who don't come into the market.

Treasurer Tim Pallas said the government would monitor the effect of any changes to the property market. "We make no apology for seeking to level the playing field between investors and home buyers," he said.

"We are making it easier for first-home buyers to get their foot in the door, and our initiatives are important steps towards ensuring today's families and future generations will be able to afford somewhere to live."

The removal of the Victorian stamp duty concession for off-the-plan investors was introduced against a backdrop of Australian banks tightening lending rules and the Chinese government limiting the amount of money moving offshore.

Photo: Louie Douvis

The property council had already seen a 69 per cent drop in the number of inner-city apartments released from March quarter 2016 to March quarter 2017, and predicted increased stamp duty would have further impact.

Ms Capp said the slowdown would affect jobs and investment coming into the market, and foreign investment was needed to accommodate the growing population expected in Victoria.

The Foreign Investment Review Board annual report shows China was the largest source of foreign investment ($47.3 billion) during 2015-16, of which $31.9 billion was in real estate.

Photo: Graham Tidy

AMP Capital chief economist Shane Oliver said it appeared building approvals for new apartments in Victoria had already peaked, which would flow through to fewer cranes on the skyline and less activity over the next 12 months, which would be a dampener on the Victorian economy.

"Hopefully other parts of the economy will fill the gap [such as tourism, higher education and infrastructure projects]; it was never going to be the case that housing was going to keep us going forever," he said.

Investorist chief executive Jon Ellis said the Victorian government's changes were "ridiculous and problematic".

The removal of the stamp duty concession brought Victoria's tax policies in line with other states and "would probably be fine if it wasn't for the fact that they have ratcheted up the stamp duty in two consecutive rounds, including levying another fee for foreign purchasers," he said.

"It means stamp duty is around the 12 per cent mark and that makes Victoria the highest taxing state in Australia, so you start to lose your competitiveness," he added.

Mr Pallas said it was only fair that foreign property buyers who enjoyed the capital growth as a result of the city's liveability and amenity paid their fair share and contributed to the maintenance of government services and infrastructure.

After only selling Australian properties, Shanghai-based property firm Aus Yard managing director Kenya Chen last year also started offering off-the-plan properties from other countries such as the United Kingdom and Malaysia.

Kenya Chen Photo: Supplied

He said many people took advantage of the strong interest in Australian property over the past few years, but many China-based agencies that sold Australian property were now facing challenges and some businesses had started closing.

Increased property taxes in Brisbane, Sydney and Melbourne meant many Chinese clients were taking a wait-and-see approach and becoming more selective about projects, while some investors are turning to other countries.

Photo: IRIS

ACproperty and Sodichan director Esther Yong, who also diversified her business, said changes in rules every year was frustrating and creating uncertainty for Chinese investors.

Meanwhile, CBRE's Mark Wizel said many developers had brought forward their sale programs in order to achieve as many presales as they can before July 1.

Chinese international property website Juwai.com chief executive Charles Pittar said the vacancy tax introduced in the federal budget was not much of an issue for most investors because they could not afford to leave their property empty. They needed the rental income for their investment to make sense, and rental guarantees were popular with these buyers, he said.