Foreign investors, who illegally buy houses in Australia and agents that enable them, face hefty fines and prison terms of up to three years under new penalties announced yesterday aimed at cooling soaring property prices.

The new and expanded punishments come in the wake of rising foreign investment in Australian real estate and widespread evidence of abuse of current laws that prevent foreign buyers from purchasing existing homes, reported the Gulf Daily News, our sister publication.

'We want to ensure that illegal foreign investment is not unnecessarily driving up prices,' Prime Minister Tony Abbott told reporters in Sydney, where house prices have risen by about a third in the past three years.

'We want to maximise the opportunities for Australians to buy a home at the best possible price.'

Data this week showed house prices across Australia's capital cities rose further in April with gains broadening out from the red-hot Sydney market, a headache for policy makers considering whether to cut interest rates to new lows next week.

Earlier this year, Treasurer Joe Hockey ordered the Chinese owner of a $30 million Sydney harbourside mansion sell within 90 days, saying it was bought illegally via a string of shelf companies.

Hockey said the home had been sold and more than 100 property purchases were under investigation.

Australian property has long been a popular choice for Chinese money but the flow of investment has accelerated.

China overtook the US to become the largest source of foreign investment in Australia last year, driven by a surge in real estate purchases.

Offshore investors will continue to be allowed to buy new homes and apartments in a bid to increase housing stock but will pay a $3,925 application fee for properties worth up to $785,100, with higher fees for more expensive properties and agricultural and commercial real estate, the government said.

Foreign buyers, who breach the laws will now face up to three years in jail or fines of $100,100 for individuals and $500,501 for companies, and third parties who knowingly assist foreign investors to breach the rules will also face civil and criminal penalties. – TradeArabia News Service