It is incorrect to simply say (as Clive Hamilton does) that Chinese purchases of Australian homes disadvantage Australians because local consumers have to pay more for their homes. The error lies in considering only the consumer surplus losses to local consumers but not recognising the gains in seller surplus to local sellers and the latter must be larger. (A bit of price theory shows that the gains in seller surplus exceed the losses in consumer surplus). It is true to say that wealth is distributed away from local home buyers to local home owners but there is an increase in total local wealth. What is true is that if it is the case that foreign buyers are driving up home prices that Australia can do better than allowing free trade in housing by imposing an optimal tariff on home purchases by foreigners – an optimal export tax that reflects Australian monopsony power in its property markets. Hong Kong has a 15% tax on purchase by mainland Chinese and this has this “optimal tariff” type of effect. Another reason for introducing such a tax might be to insulate Australia from the effects of a collapse in the prices of substitute Chinese housing assets which often seem to be caught up in a property bubble. But this will limit the current windfall gains locals get from Chinese paying too much for Australian properties.
Whether you want your housing stock in the hands of foreigners is not really the issue. If a Chinese pays a huge price for an Australian home then that can be used to build another home and, if the Chinese owner does not become a resident the first purchase will be most-likely be placed on the local rental market reducing rental costs in that market. Whether Australia wants many more Chinese immigrants is, of course, an issue for immigration policy. It is disconnected from the issue of whether we should have free-trade in our housing assets.