"If you took illegal foreign purchasers out of market, the market would not resemble anything near what it is today. There's tens of thousands of illegal purchases."

Sydney buyers' agent Pete Wargent said the latest announcement by the Treasurer would have no impact on buyers who purchased property illegally.

"It's more a case of people coming forward than being exposed. The FIRB (Foreign Investment Review Board) does not have the capacity to do very much and there's not much appetite to stop foreign capital coming into the country," he said.

Significant wealth

Mr Wargent said many of the Chinese buyers he dealt with had significant wealth and often paid in cash, with the money transferred into the country in tranches.

In his weekend announcement, Mr Hockey said all five investors forced to divest their properties had come forward voluntarily to take advantage of an amnesty, which applies until November 30. From December 1, foreign buyers who break FIRB rules face hefty fines, civil penalties, forfeiture of capital gains and jail sentences.

"Time is running out for foreign investors to voluntarily come forward if they have illegally purchased existing residential real estate," Mr Hockey said.

Malcolm Gunning, president of the Real Estate Institute of NSW, said anecdotal evidence from the institute's international chapter was that the crackdown was changing buyer behaviour, with foreign purchasers now seeking FIRB approval before buying – as is required – rather than buying first and then seeking FIRB permission.


As a result, Mr Gunning said, there had been a pullback from those foreign buyers "seeking easy entrance to the market".

In Victoria, on top of the federal crackdown on illegal purchases of real estate, foreign buyers have been required since July 1 to pay an extra 3 per cent in stamp duty on residential purchases.

Real Estate Institute of Victoria chief executive Enzo Raimondo said anecdotal evidence indicated foreign investors were still very active in parts of Melbourne, including the inner east and Bayside suburbs.

"The rules are fairly simple. But if buyers want to skirt them they will find a way," he said.