Foreign investors buying existing homes or who leave properties vacant could face substantially higher fees and penalties under changes proposed by the federal government.
The government has introduced legislation to triple the charge foreign investors will pay to purchase established homes and double the penalty they face for leaving a property vacant.
In a statement, Treasurer Jim Chalmers said the changes, together with a cut in the application fee foreign investors in build-to-rent projects have to pay, will help boost supply in the nation's very tight housing market.
The amendment is about making sure foreign investment aligns with the government's agenda to lift the nation's supply of affordable housing, Dr Chalmers said.
Foreign nationals are generally barred from buying existing property, but can do so in limited circumstances, such as moving for work or study.
When they depart, they are required to sell if they have not become a permanent resident.
"These changes further encourage foreign nationals to buy new property instead and help to ensure that those who do get approval follow the rules," the government said.
Treasury data shows foreign investors bought residential property worth $7.9 billion last financial year and Chinese buyers were by far the biggest players in the market.
Under the proposed changes, the fee to buy an established home worth less than $1 million will jump from $14,100 to $42,300.
For a property valued between $1-2 million, it will rise to $84,600 and for a home worth between $2-3 million the charge will be $169,200.
For a property worth between $1-2 million the vacancy penalty, which applies of the home is occupied for less than 183 days a year, the penalty will increase from $28,200 to $169,200. But the property sector is sceptical the changes will do much to boost supply, claiming foreign capital was important.
Instead, a Real Estate Institute of Australia spokesperson warned they could make the nation's housing shortage worse.
"Measures such as these may score political points, but they do not fix the problem of housing supply," the spokesperson said. "In fact, disincentivising foreign capital is likely to have the reverse effect."
When the changes were first announced in December, Property Council of Australia chief executive Mike Zorbas said lowering fees for build-to-rent projects was "an important step".
But he warned that higher fees and increased penalties could hamper the nation's ability to attract the property investment it needs.
"In a highly competitive global market for capital, [cabinet] needs to think holistically about the tax settings that can help or hinder investment in creating more homes for Australians," Mr Zorbas said.
"Cutting against the investment grain are those outright deterrents to long term overseas investment in our cities and housing."
Opposition housing spokesman Michael Sukkar said the Coaliiton would review the government's proposed changes "on its merits, but it looks underwhelming".
"With record levels of migration and fewer homes being built, the situation for first home buyers and renters is only becoming more difficult," Ms Sukkar said. "If the Government was serious about addressing Australia's housing issues, they would address the collapsing supply of houses and reduce the record levels of migration."
The government said the foreign investor changes were part of its housing agenda, which includes a goal to build an extra 1.2 million homes in five years, the $10 billion Housing Australia Future Fund, an extra $2 billion for social housing and more generous rent assistance.