Three of Australia’s big four’ banks have tightened their mortgage rules, and have ceased lending money to offshore customers who are not citizens or permanent residents of Australia.
The changes come on the back of rising concerns that fraud and money laundering are increasing among foreign buyers in the Australian property market, according an ABC report.
A raft of new rules were introduced last year, including visa checks, heavy fines, and forced sales to deter illegal foreign investment in the Australian housing market. Xu Jiayin, one of China’s richest men, was ordered to sell his $39 million Point Piper mansion within 90 days because it was purchased without approval of the Foreign Investment Review Board. The Treasury announced that several properties were being investigated for potential non-compliance with FIRB rules.
Australia’s banks have subsequently come under pressure to improve their lending procedures for foreign property investors/buyers including requiring better documentation and seeking higher deposits. The banks are now responding with tougher lending rules.
This week, Westpac Bank joined ANZ and Commonwealth Bank to stop any lending to a non-resident, even if the applicant’s income is not relied on to meet serviceability. In addition to this, Australian and New Zealand citizens and permanent visa holders with foreign income are restricted to loans for new housing only with a maximum loan to value ratio of 70 per cent, down from 80 per cent.
According to the ABC, the banks have also tightened up rules regarding the documents required to get a loan, including providing original visa, income and passport documents.
The Reserve Bank earlier this year noted that property prices could decline and bank losses could rise if Chinese demand were to decline significantly, and the changes in bank lending rules could be the beginning of a downturn.