The Foreign Investment Review Board has failed to enforce laws restricting investment in real estate by foreigners, says the MP leading a federal inquiry into housing affordability.

Coalition MP Kelly O'Dwyer told a forum hosted by Bloomberg News in Sydney that evidence presented at the inquiry suggested that restrictions on foreign buyers – who cannot buy established homes without approval – were not being adequately enforced by the board.

She is in favour of stiffer penalties and better enforcement.

"I must say I think there has been a failure of leadership in FIRB," she said. "I think they have not been proactive in the way they have gone about their role.

"I do understand that they have limited number of people," Ms O'Dwyer said. "I don't think that, though, excuses them for not following through with the current regime that is in place and has been in place for a period of time now."

Ms O'Dwyer is leading a joint Coalition and Labor committee – due to report in October – considering changes to make it harder for foreign property buyers. These include imposing extra stamp duty on overseas investors, as Singapore has done, or a charge on FIRB approvals.

With the busiest season for real estate sales under way, community concern is growing that cashed-up mainland Chinese buyers are pricing Australians out of their own market. Economists have said, however, that American and British corporate buyers are just as prevalent when it comes to high-end properties, while the Chinese are more likely to buy purpose-built, high-density inner-city apartments.

These types of developments are often built with Chinese money and marketed directly at potential buyers from China.

Foreign investment in real estate surged to $24.8 billion in the first nine months of the latest financial year, which was an increase of 93 per cent on the previous year, according to Treasury figures.

"At the moment under the existing framework, we very much encourage foreign investors to invest in new dwellings because we see that as having a strong benefit for the country, both in terms of  supplying new housing but also in terms of the economic output  that flows from that," Ms O'Dwyer said.

"But there are restrictions already in place for non-resident foreign investors wanting to purchase existing dwellings, and some of the evidence to date that has been presented to the committee is that the foreign investment restrictions on those people have simply not been enforced.

"We broadly think that the framework is right, that those kind of restrictions are right, that the current freedoms on new investors are also right.

"But  if you have a framework in place, in order to give confidence to people  in the Australian community, you have to have a regime that is properly enforced.

"So we are looking at a civil penalty regime that would apply to people who contravene the rules," she said.

She said the current fine, of $85,000, was considered simply as the "cost of doing business".

She favoured fines that were more closely related  to the value of the properties in question.