Treasurer Joe Hockey said more residential property purchases are being investigated by the Foreign Investment Review Board. Hockey gave no details of the other houses now being investigated, except to say they were across the range in terms of value.

"It's amazing how many phone calls we've received this morning," the Treasurer said on Wednesday following his announcement that the government would force the sale of the $39 million Point Piper mansion Villa de Mare after finding the purchase breached foreign investment rules. "We want to get to the point where realistic evidence is being properly investigated," Hockey said. "I mean, we are not going on a witchhunt and we don't want to create an atmosphere of xenophobia or anything else. We want to be in a position where we maintain, preserve and enhance the integrity of the foreign investment regime and Australians ... any Australian that goes to an auction needs to know that they are competing on a level playing field with people that are lawfully able to acquire the property."

The home is owned by Sydney-based, China-owned company Golden Fast Foods, which is ultimately controlled by Chinese developer Evergrande Real Estate Group and China's 15th richest man Xi Jiayin. The home must be sold within 90 days or the owner risks having it repossessed by the Commonwealth Department of Public Prosecutions. If the house sells for a profit, the owner can keep that, but under proposed new penalties for breaches of FIRB rules, the owner would not be able to profit and would have to forfeit to the government either the entire capital gain or pay 25 per cent of which ever was highest, the market value or sale price.

Sources say a legal challenge is brewing between accountants and lawyers who advised on the deal and the Foreign Investment Review Board as a result of the divestment order issued on Tuesday, reports The Australian Financial Review.