SYDNEY (Nov 27): Australia could tighten rules on foreign purchases of housing, including tough new penalties for avoidance, under proposals by a government-backed inquiry on Thursday.

The inquiry, chaired by ruling Liberal Party lawmaker Kelly O'Dwyer, was set up to look into concerns that foreign investment was inflating prices and putting homes out of the reach of local buyers.

The inquiry found that current rules on foreign purchases were not being enforced and made 12 recommendations for change, including civil penalties for any breaches.

Penalties would also apply to all third parties who knowingly assist a foreign investor to breach the framework. Any capital gains from the sale of an illegally held property would be seized by the government.

The committee also recommended establishing a national register of land title transfers that would record the citizenship and residency status of all home buyers.

Prices in Sydney rose more than 13 percent in the year to October, prompting many media reports of foreigners snapping up properties.

Although the inquiry was not focussed on investors from any particular country, wealthy buyers from China have largely been blamed for ramping up home prices in Australia's major cities.

Australian property has long been a popular choice for Chinese money - both legitimate and illegitimate - but the flow of investment appears to have accelerated of late.

Australia's Foreign Investment Review Board (FIRB) received approvals to invest nearly A$6 billion ($5.58 billion) into the sector in 2013, up 41 percent on the year. China was the No.1 source of foreign capital investment into real estate.

China is expected to see annual growth of 20 percent in outbound real estate investment in the next decade, up from $11.5 billion last year, property agent Savills has forecast.

Australia is now the second-most favoured destination for Chinese property buyers, behind the United States but ahead of Canada and Britain, according to Juwai.com, the largest real estate portal that targets Chinese buyers looking abroad.