The tougher borrowing rules for Australian property investors are taking their toll as thousands of investors are struggling to complete their purchases.
According to local and overseas mortgage brokers and financiers, the funding of Chinese clients from Australian banks have been frozen, leading them to face foreclosure or exorbitant interest rates from private financiers. Likewise, local clients are also having their settlements deferred by three months to find alternative funding.
“All the deals have been frozen,” said Mark Yin, an agent at Shanghai-based Home Tree Group. “We are now looking for finance all over the world.”
Marshall Condon, chief executive of mortgage broker Neue Black, also has the same sentiments. “In the next three to 12 months, many investors will be applying for funding to complete their deals. However, they will become increasingly concerned as they discover funding is limited,” he said.
Billions of dollars have been invested in high-rise apartments in Melbourne, Sydney, and Brisbane. Many of them have been sold off-the-plan, which requires a second valuation and financing commitments by the lender. However, lenders have slammed on the breaks after loan application spot checks revealed widespread fraud, especially among mainland Chinese buyers, which account for about half of the deals.
As a result, some groups have stopped dealing with Australian properties. Other sought finance from newly established mortgage funds, but they were charging high interest rates of between eight and 12 per cent.
“We are reluctant to take on new clients unless they have 100 per cent of the cash for a property,”said Scott Kirchner, manager of Bella Resident in China. “But then there’s the issue of how do they get the money out of China.”