China has become Australia's biggest source of approved foreign investment for the first time after a $12.4 billion splurge on real estate last financial year.

Chinese investors planned to spend $27.7 billion here according to the Foreign Investment Review Board annual report, issued last Thursday, overtaking United States investors who were approved to spend $17.5 billion.

Investments in real estate accounted for almost half China's total, with its $12.4 billion approved investment more than twice the amount spent by the Americans on real estate.

The Abbott government has proposed tough new rules on foreign investment in residential property and ordered one Chinese buyer to sell a $40 million mansion that was bought illegally.
 
The FIRB figures tally approved investment rather than actual investment and may understate US investment due the higher threshold that exists for US investment compared with China under the existing trade rules. While China has topped the US for annual approvals, the US, Great Britain and Japan still have greater accumulated investment in Australia than China.

The statistics did not give a breakdown of the residential investments by country but did reveal the number and value of property transactions almost doubled from 11,668 transaction to 23,054 in 2013-14.

The value of proposed investment in residential real estate increased to $34.7 billion, up from $17.2 billion. Investment in newly developed homes was up 200 per cent to $25.8 billion while investments in existing homes – that can only legally be bought by temporary residents in Australia – was up 32 per cent to $7 billion.

The report showed a substantial increase in the number and value of foreign investors buying existing residential properties, up almost $3 billion. Commercial real estate investment also increased to $39.9 billion from $34.8 billion.

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