The Chinese are leading the list of foreign property investors in Australia with strong demand for real estate also coming from the United States, Singapore and Malaysia.

Foreigners buying real estate is a controversial subject in Australia with concerns being voiced that in the residential market they are pricing out locals. Tougher rules have been introduced recently for foreign buyers.

Since December 2015, all foreign investors must pay a fee before their foreign investment application will be processed and stricter penalties have been introduced up by the Australian Taxation Office for those who breach the rules.

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For Victoria, including the capital city of Melbourne, this fee is in addition to the state based 3% duty payable on the purchase price, and the annual absentee tax of 0.5% on the property value for foreign owners who leave their property vacant for extended periods throughout the year.

But despite this Chinese applications ranked highest as the largest potential source of foreign investment in Australian property in 2014/2015 and Victoria overtook New South Wales to attract the most investment applications in proposed residential property for development.

Proposed foreign investment in Australian residential and commercial property was up 30% to $96.9 billion in 2014/2015 and represented 49.8% of all investment approvals, according to data from international real estate firm Knight Frank.

China's total property approvals tallied $24.4 billion, up 97% over the year, followed by the United States with $7.1 billion, Singapore with $3.9 billion, Malaysia with $3.4 billion and Korea with $2.5 million.

Proposed investment in new residential property for individuals rose 86% to $14.4 billion in Australia, which comprised of 20,551 approvals in 2014/2015.

Residential at 31.2% and commercial at 18.6% property represented 49.8% of all proposed foreign investment in 2014/2015. Growth was recorded at 30% over the year to reach a total of $96.9 billion.

The report explains that non-residents of Australia are currently limited to purchasing new or off the plan property with a fee payable on application to the Foreign Investment Review Board. Total investment in developer off plan property was $28.7 billion in 2014/2015, almost double the $16.4 billion over the previous year.

Proposed investment in new residential property for individuals rose 86% to reach $14.4 billion in Australia, which comprised of 20,551 approvals, up significantly on 2012/2013 when investment approvals were $2.9 billion and 4,499 individual purchasers were approved.

As a comparison, over the financial year of 2014/2015, approvals for existing commercial property actually fell 10% to $28.5 billion.