The Government has announced it will reverse the relaxation of the foreign investment rules bought in last April as they are concerned that the increase in foreign investment is forcing property prices up. This is having an impact on the affordability for Australian property buyers.

This now means that temporary residents of Australia who purchase an existing property within Australia will need to sell the property when they leave the country.

Many homebuyers and real estate agent have expressed concern about foreign investors outbidding locals at auctions.

Amendments to the Acts are being proposed to ensure that foreign non-residents can only invest in Australian real estate if that investment adds to the housing stock via building a new property and that investments by temporary residents in established properties are only for their use whilst they live in Australia.

All temporary and foreign investors seeking to purchase an existing property are subject to compulsory notification, screening and approval requirements set out by the Foreign Investment Review Board (FIRB).

Temporary residents and foreign students who are approved will now have to:

- Compulsorily sell the established property they have bought when they leave Australia

- In the event they have purchase vacant land, they will be required to build within 24 months or have the land compulsorily sold back into the market.

The Government is also introducing a tougher compliance and penalty regime for breaches of the foreign investment rule.

Prime Minister Kevin Rudd says the new rules for foreigners wanting to buy Australian houses are aimed at easing sharp rises in the property market.

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