Australian lenders are clamping down on home loans to foreigners as concerns about the health of the nation’s housing market mount.
Westpac Banking Corp. will no longer lend to offshore customers who aren’t citizens or who don’t hold appropriate residency visas, it said in an e-mail. It follows Commonwealth Bank of Australia, National Australia Bank Ltd. and Australia & New Zealand Banking Group Ltd., which have tightened funding to overseas customers.
The changes made by the biggest banks in the country are part of a broader scrutiny of foreign buying of Australian homes, which has helped drive a 55 percent jump in home prices across the nation’s capital cities in the past seven years.
Rising demand, particularly from China, has triggered community concern that locals are being priced out of the property market, prompting the government to tighten scrutiny of foreign investment.
“In line with Westpac Group’s responsible lending practices, we have strengthened our policies regarding non-residents lending and foreign income, which represent a very small component of our loan book,” the Sydney-based lender said.
Westpac said it won’t accept applications from non-residents, self-employed foreigners and temporary visa holders living overseas. The bank also reduced the loan-to-value ratio for mortgage applicants with foreign income to 70 percent from 80 percent.
In a note to mortgage brokers announcing the changes, the lender said its priority continues to be “to support Australian citizens and permanent residents living outside of Australia on their journey to own a home or investment property” in the country.
The Reserve Bank of Australia in its semi annual assessment of the nation’s financial system warned buying of Australian homes by Chinese posed an “indirect risk” just as government data showed acquisitions of houses and apartments by residents of the second-largest economy doubled for the second consecutive year.
The changes in lending policies come as the government in the state of Victoria said it will double a property tax for foreigners from July 1 in a move likely to undermine surging prices in its capital Melbourne, Australia’s second-largest city.
The tightening is starting to bear some fruit with demand from overseas buyers for new housing dropping to 11.8 percent in the first quarter from a high of 16.8 percent in the third quarter of 2014, according to a survey by National Australia Bank.
The annual rate of Australian housing market capital gain slipped to the lowest in 31 months in March, according to data from research firm CoreLogic Inc. The median dwelling price in Sydney has dropped from a peak of A$780,000 ($604,000) in October to A$730,000 in March, the data shows.