Illegal sales of Australian residential properties to foreign investors are being inflamed by unlicensed real estate agents overseas.

Managing director of Ausin Group, which markets Australian real estate to Asian investors, Joseph Zaja believes the Federal Government would be better off stopping those who are facilitating illegal sales, rather than going after individual purchasers.

"We support the government tightening its investment rules around second-hand property purchases. However its primary focus should be on people illegally selling property," Zaja told the Australian Financial Review.

The government recently increased its focus on illegal foreign investors, with the Australian Taxation Office investigating almost 200 sales suspected of being in breach of Foreign Investment Review Board rules.

Record setting Point Piper mansion Altona was recently revealed as being sold illegally, while Villa Del Mare in the same suburb was the subject of a forced sale earlier this year.

Zaja believes the government should take a broader approach to the issue.

“The government needs to adopt a holistic approach to this problem which includes the implementation of legislative changes to ensure all overseas as well as local agents selling Australian property hold the

appropriate licences to do so,” he said.

"We estimate that over 90% of Chinese-based companies selling Australian property are unlicensed to do so and consequently do not have an understanding of the rules applicable to this market sector."

While Zaja believes the government should change their tack in preventing sales to people who don’t have FIRB approval, Rich Harvey, managing director of Sydney based firm Property Buyer supports the action being taken by the authorities at present.

“A few years ago the FIRB would rubber stamp any application, unless it was somebody or some organisation that was already known and not wanted in the country, then it was unlikely they would be rejected,” Harvey said.

“People here on student visas were buying property, but it’s been tightened now and the penalties increased so it’s just a matter of enforcement.”

While he is supportive of the strengthened laws, Harvey said it’s also important foreign investors aren’t scared off.

“We don’t want to dissuade from them investing here, foreign investors are a good source of investment in the market and we should be encouraging them to invest in the right areas.”