By Tom Westbrook

SYDNEY (Reuters) - Australia has forced the sale of 16 properties bought without government permission by foreigners, Treasurer Scott Morrison said on Monday, after ramping up enforcement of overseas investment rules that have until recently been rarely applied.

Foreign ownership of land has become a sensitive issue in Australia and a flashpoint between Australia and China as debate rages over the effect of overseas investment on real estate prices and on national interests.

Chinese nationals were involved in seven of the 16 deals which have been rolled back since May.

"Foreign investment in Australia occurs on Australia's terms," Morrison told reporters at a press conference in Sydney.

Foreigners must seek approval from the government's Foreign Investment Review Board before purchasing property in Australia.

The government has forced the sale of 46 properties with a total value of A$93 million ($70 million), mostly held by Chinese interests, since 2013.

Neville Sanders, president of the Real Estate Institute of Australia, a professional association of real estate agents, said the foreign investment purchases were rarely scrutinized until 2015.

The new sales came around the same time that Morrison blocked Chinese bidders from buying the country's largest farmland holding, and Chinese and Hong Kong bidders were blocked from buying electricity distributor Ausgrid in August, sparking accusations that Australia had become protectionist.

"The government is trying to run a fine line between making Australia conducive as a place to invest in, but at the same time trying to placate the more extreme manifestations of populism," Monash University political scientist Nick Economou said.

Far-right political leader Pauline Hanson last week said that "any foreign ownership is regrettable," in a speech to parliament, and singled out Chinese investment and land ownership as unwanted.

Of the remaining 16 forcibly sold properties, British nationals owned four, Canadians two, and the remaining three belonged to Malaysian and Papua New Guinean interests, according to a list issued by the Australian government.

The properties sold for a combined A$14 million ($10.5 million), with the bulk of the proceeds going to the seven Chinese owners. The sellers were also fined for breaking the purchasing rules.

House prices in metropolitan Sydney and Melbourne are growing fast, with annual growth above 9 percent in both cities.

"It's really targeted at the Australian market to say they're doing something to make property more affordable for locals," said Ken Jacobs, the managing director of Christie's International Real Estate in Sydney.

($1 = 1.3275 Australian dollars)

(Reporting by Tom Westbrook; Editing by Eric Meijer and Kim Coghill)