A huge number of brand new off-the-plan apartments could be forced into the market by existing buyers struggling to gain the necessary financing despite paying deposits months ago, potentially causing property prices to take a dip.

According to the Australian Financial Review, Chinese buyers’ funding from Australian banks have been frozen, leaving them with the prospect of foreclosure. Having already paid the deposit, those property buyers now need to get their apartments valued and secure funding to complete the sale, but that appears unlikely. 

In the recent months, Australia’s big four banks--Australia and New Zealand Banking Group, Commonwealth Bank of Australia, National Australia Bank Ltd, and Westpac Banking Corp--have all stopped lending to property buyers with foreign income due to the rise of sloppy applications and widespread fears of fraudulent activity.

As a result, some might be forced to foreclose, while others could default or take on much higher interest rate loans from small lenders. This could also force developers to go bankrupt, property prices to plunge due to a supply glut, and banks’ bad debts to rise. Many foreign buyers might also abandon the Australian property market altogether.

To remedy this problem, a number of offshore financiers based in Singapore or Malaysia are now offering rescue packages for the borrower, but they are also lending funds at higher rates or buying apartments off distressed borrowers at discounted prices.