The $55 billion increase in all approved foreign investment in Australia, to $248 billion, was "predominantly driven by increased investment in the real estate sector", FIRB chairman Brian Wilson wrote in the report released on Tuesday.

China was the largest source of foreign investment ($47.3 billion), of which $31.9 billion was investment in real estate.

The large number of applications for FIRB approval in 2015-16 (41,445) were "largely driven by residential real estate transactions", Mr Wilson wrote.

Most of the FIRB applications approved were for less than $1 million (33,045).

Chinese buyers won approval for 30,611 applications.

A third of residential real estate approvals were granted for NSW homes, and 44 per cent for Victorian homes.

By value, investment in new homes made up a third of total foreign investment in Australia last year.

Foreign real estate investment overall rose by 36.8 per cent.

The United States was the second-largest source of foreign investment ($31 billion), with approvals spread across services, real estate and finance.

A crackdown on foreign buyers by the Australian Taxation Office led to the forced sale of 39 properties worth $48.7 million during the year, for offences including failing to sell a home once a temporary residence visa has expired, or failing to seek approval for a home purchase.

The figures suggest the introduction of a foreigner buyer surcharge in Victoria in 2015 did little to dampen demand for new homes. NSW introduced a similar surcharge last year.

New rules to clamp down on residential property speculation in China have made it increasingly difficult for Chinese to buy second homes or investment properties in cities such as Beijing and Shanghai, fuelling the trend to buy offshore.

However, the Chinese government has also made it harder for Chinese to move money overseas to finance new apartment purchases.