The call comes after The Australian yesterday reported the FIRB has failed to prosecute any foreign buyer for breaching the foreign ownership rules, which are aimed at preventing investment in established homes in Australia.
The government announced in 2010 that foreign investors may only purchase new housing stock and temporary residents may only purchase existing housing for use while they reside here.
It's reported the House of Representatives economics committee has been told foreign investors view the current $85,000 fine as the "cost of doing business".
John Cunningham, principal at Cunninghams Property, told Real Estate Business the lack of prosecutions "is making a mockery of the regulations", but warned there is a far more sinister undertone to this that has been bought to his attention from sources close to the coalface of these type of sales.
"Many properties are left vacant due to both the nature, origin and source of funds used to buy the properties, as well as the flaunting of Australian laws around the procurement of residential property in Australia,” said Mr Cunningham.
"Keeping under the radar of detection on both fronts is crucial as there appears to be no checks and balances in place that may detect breaches or illegal activities," he added.
Mr Cunningham said having a property vacant in many instances keeps both state and federal tax alerts at bay and hence, the triggers don't go off.
“It appears to be well organised and a well-executed strategy, and has far greater implications for the economy if allowed to go on unchecked," he said.
Property law expert, Ron Eames, a partner at Holding Redlich, explained to Real Estate Business that the FIRB is under resourced so "any perceived inaction is more likely to be a resourcing issue rather than a lack of the will to do something".
The Real Estate Institute of Australia believes the policy relating to foreign investment in residential real estate should remain unchanged, but that the "powers of enforcement, the penalties and the compliance and monitoring activities of the FIRB introduced in 2010 for established homes be independently reviewed as to their effectiveness and appropriateness".
They are calling for the $85,000 fine to be replaced with a penalty of 10 per cent of the property's value.
Chinese property website Juwai.com has hit back, stating that The Australian article was “heavy on drama, but light on accuracy”.
Andrew Taylor, co-CEO at Juwai, told Real Estate Business he agrees with RBA governor Glenn Stevens’ view that Chinese investment is important but "rather less prominent around most of the metropolitan areas than some of the headlines might suggest".
"I haven't seen any actual proof that large numbers of Chinese or any other foreign buyers are holding vast quantities of apartments off the market. Even if they were, they have added many more new units to the market by making it possible to construct new buildings than they could possibly be holding empty,” said Mr Taylor.
"If an Australian keeps an apartment empty, is that also bad? Do you want someone looking over your shoulder and telling you what to do with your investment property or your vacation home?"