A leading Chinese-Australian brokerage says Westpac’s decision to stop lending to non-resident borrowers has come sooner than expected.
The major bank confirmed in a statement yesterday that it has made changes to its non-resident lending policy, effective this week.
Westpac, St George, Bank of Melbourne and BankSA will no longer accept mortgage applications from non-residents. The banks will also no longer accept any foreign self-employed income applications or applications from temporary visa holders living overseas.
In addition, LVRs for acceptable domestic applications with foreign income will be reduced from 80 per cent to 70 per cent.
Commenting on the policy changes, Donald Tang of Sydney-based brokerage Alliance Mortgage Solutions (AMS) said Westpac’s decision was “quite a big change for the industry”.
“We have heard people talking about this change from about a month ago but didn’t realise it would come through so quickly,” Mr Tang told The Adviser.
“I think Westpac does have their multiple reasons for this policy change so we have no other choice but to accept it.
“This will affect our business for sure but I think we will be fine by taking clients to other lenders whose policies still cater for foreign income buyers.”
Mr Tang said that less than 25 per cent of his business came from foreign buyers and it is “too early to say” whether the policy changes would hurt Chinese demand for local real estate.
Westpac’s decision came after ANZ and CBA took similar action earlier this month to reign in mortgage lending to foreign buyers.
The banks’ actions coincide with warnings from the central bank about the impact of Chinese demand on the local property market.
In its half-yearly Financial Stability Review released earlier this month, the RBA predicted that a substantial reduction in Chinese demand would likely weigh most heavily on the apartment markets of inner-city Melbourne and parts of Sydney “not only because Chinese buyers are particularly prevalent in these segments but also because other factors would reinforce any initial fall in prices”.
“These include the large recent expansion in supply in these areas as well as the practice of buying off-the-plan, which increases the risk of price declines should a large volume of apartments return to the market if the original purchases fail to settle.”
While Australian banks have little direct exposure to Chinese property investors, the Reserve Bank fears a reduction in demand could trigger broader risks for local lenders.
“Although the direct exposures are small, if a reduction in Chinese demand did weigh on housing prices, this could affect banks’ broader mortgage books to some extent,” the RBA said.
According to the latest NAB Quarterly Australian Residential Property Survey, the share of demand coming from foreign buyers fell to a two-and-a-half-year low of 11.8 per cent, down from a peak of 16.8 per cent in the third quarter of 2014.
[Related: Foreign buyer demand hits two-year low]
James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.
He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.
He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.
James holds a BA (Hons) in English Literature and an MA in Journalism.
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