Foreign buyers face hurdles as lenders say no to foreign currency, income

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As major lenders ANZ and Westpac review their mortgage books with concerns they have written loans on the back of fraudulent foreign income declarations, multiple smaller lenders have taken steps to restrict their lending to overseas buyers.

According to the Australian Financial Review, non-major Citigroup wrote to mortgage brokers to advise them of a number of foreign currencies it will no longer allow overseas borrowers to use as payment for Australian real estate.

According to the AFR report, Citigroup has a list of 12 foreign currencies it will allow to be used in the purchase of Australian real estate, while only Australian citizens and permanent residents will be able to include income earned in a currency other than that of their nationality.

In a statement supplied to Your Investment Property Magazine’s sister publication Australian Broker, a Citigroup spokesperson said the lender was reacting responsibly industry concerns.

“We want to continue to ensure we have a robust and healthy residential loan book catering to foreign buyers. In light of recent industry concerns regarding foreign residential loan applications relying on offshore income we have excluded certain currencies to ensure we don’t attract any increases in unwanted loan applications,” the spokesperson said.

“These currencies include the Chinese RMB, Indian Rupee (INR), Indonesian Rupiah (IDR), Malaysian Ringit (MYR) and Taiwan Dollar (TWD).”

Citigroup will only accept Canadian dollar, Danish kroner, European Union euro, Hong Kong dollar, Japanese yen, New Zealand dollar, Swedish kroner, Singaporean dollar, South Korean won, Swiss franc, UK sterling and US dollar from overseas borrowers.

The lender will also now not accept mortgage applications that rely solely on rental income, while all foreign borrowers must translate documents into English and convert funds into Australian dollars.

AFR also reported that Bendigo and Adelaide Bank have written to brokers to advise them they will no longer lend to foreign buyers and not to include foreign income streams in loan applications.

A statement from Bendigo and Adelaide Bank said the lender is currently reviewing its lending arrangements for foreign borrowers.

“Bendigo and Adelaide Bank has always had a policy which allowed funding of expat Australian borrowers and, in certain circumstances foreigners to purchase property in Australia. 

“This financial year, in the eight months to end of February 2016, this amounted to new lending advanced of less than $60m. 

“In March and April following policy adjustments at other banks, we have seen a marked increase in enquiry and applications, exceeding our risk appetite.  As a result we are reviewing our current position in the market.”

The announcements from Citigroup and Bendigo and Adelaide Bank follow remarks from economic commentator and BRW Magazine founder Robert Gottliebsen who said restrictions on foreign buyers could have a huge impact on the Australian property market, especially the apartment sector.

“If you asked me what I thought was the biggest threat to Australia internally in the next 12, 18 months or two years it’s that we’ve built a vast number of apartments that Asian, and mainly Chinese, investors have bought off the plan and paid 10%,” Gottliebsen said.

“They’re having difficulty getting extra money out of China and our local banks are saying now we want lend to you or they’re making it very difficult,” he said.

“If they don’t go ahead with those apartment purchases, we’ll have great disturbances in the property market.”

Prior to announcing they were investigating possible fraudulent applications, both ANZ and Westpac had restricted lending to foreign borrowers.
 
 

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