FOREIGN students and temporary residents will face tough new rules when buying a house and will have to sell on leaving Australia.

The Federal Government's crackdown, to be announced today, reverses its December 2008 decision to relax foreign ownership rules.

Bowing to public pressure, the Government will also introduce a hotline for concerned locals to "dob in" foreigners they suspect of breaching the rules.

Under the rules, temporary residents and foreign students will be:

SCREENED by the Foreign Investment Review Board to determine if they will be allowed to buy a property.

FORCED to sell property when they leave Australia.

PUNISHED if they do not sell by a government-ordered sale plus confiscation of any capital gain.

REQUIRED to build on vacant land within two years of purchase to stop "land banking".

Failure to do this would also lead to a government-ordered sale.

There have been growing claims that real estate prices have been forced up by wealthy Asian families, especially from China and Korea, buying up property and outbidding locals at auctions.

The Government is concerned by anecdotal reports that foreigners are "collecting" houses, often in the same street, and leaving them empty when there is a shortage of housing.

Assistant Treasurer Senator Nick Sherry said he wanted to ensure foreigners did not put "pressure on housing availability for Australians".

Treasury is investigating 50 suspicious residential buys by foreigners in Melbourne.

Senator Sherry said the changes would "ensure that investment is in Australia's interests and in line with community expectations".



He said the Government would catch cheats with new powers allowing it to cross-match information from Land Victoria and the Immigration Department.



It will also rely on members of the public to report suspicious property buyers to a new hotline: 1 800 031 227.



"I want to make sure everyone in the community has a direct line to report their concerns," Senator Sherry said.



"If you do the wrong thing, you will be found out."



New penalties, which may be linked to the value of the property, will apply to buyers, sellers and estate agents.



There is no data showing how many properties have been bought by temporary residents.



Since the Government's 2008 change, the median house price in Melbourne has risen from $450,000 to $524,500.



Foreigners living overseas are still prevented from buying existing homes and only allowed to buy or build new ones.

Originally published as Hands off our homes