The "serious situation" had prompted Mr Hu to quickly change the direction of the company in Australia to focus on masterplan house and land communities, which was also one of its areas of expertise in China.

Country Garden closed one of the biggest foreign buyer deals in Australia last year, snapping up a 363-hectare greenfield development site in the booming Melbourne western growth corridor, Wyndham Vale for $400 million.

Australia has, despite warnings, "shot itself in the foot", said ASX-listed Mandarin-speaking agent and broker N1 Holdings managing director Ren Hor Wong said.

"A lot of developers have decided not to proceed with building. Projects might be approved but they have not proceeded. In the end the supply isn't there," Mr Wong said.

"And we have tainted our own reputation in the world as an investment destination."

Mr Wong, whose business handles project marketing and funding for smaller developers, says the shortage of pre-sales have stymied projects and even developers which have achieved pre-sales now face settlement issues.

The Property Council of Australia previously warned the federal government not to make foreign investment the "boogie man" because it has the effect of increasing housing supply for locals.

Call for 'more red carpet than red tape'


Crown Group managing director Iwan Sunito said Australia should be rolling out the red carpet instead of red tape.

"These policies [targeted at foreign buyers] are shortsighted because supply of housing including rental properties are needed."

"Make it more red carpet than red tape."

"For example don't stop lending, but reduce it to 50 per cent. And increasing penalties is counterproductive because it has the effect of reducing taxes such as stamp duty in the long run (when buyers leave)."

Chinese developer Starryland's managing director Hao Liu who sold out his Parramatta Promenade apartments in 2014 said it was not only counter-intuitive but unfair to introduce stamp duty surcharges and lending cuts so late in the cycle.

"The foreign buyer correction has come during the downturn in the market. When it was hot in 2014, the government happily allowed foreigners to buy but only when people complained they increased taxes," he said.

"Many developers entered the market excitedly only to be trapped further down the development cycle."

Chinese won't invest where they aren't welcome


Another major Chinese developer with several apartment projects in Sydney which is trying to tap into other Asian markets such as Indonesia said "foreign buyers don't want to invest in a country that doesn't welcome them."

For the same difficulties in getting money out of China, Chinese buyers would rather go to other countries like the UK and the US where there are no outright stamp duty penalties, it said.

"If Australia wants to maintain some balance, it should consider the loosening of these policies," the company said.

The deteriorating conditions have forced Melbourne-based Mandarin-speaking property platform ACProperty/Sodichan to turn its attention to other international markets.

The group did not sell any new apartments in Melbourne to foreign buyers last year. "If I hadn't gone international, my business would have been done for," director Esther Yong said.

But all is not lost, developers say.

Foreign buyers have not gone completely and many with capital already transferred out of China are still looking at prime or luxury projects and the weakening Australian dollar could a saving grace.

Developers have also not stopped buying land for a later recovery, selling agents like The Agency said.