Foreigners will no longer be able to loan money from major Australian banks

3 of the country’s big 4 banks have decided to tighten their rules when it comes to mortgages, and have altogether halted lending money to clients from offshore locations who are not permanent residents or citizens of Australia

These changes were made following the increasing concerns that instances of money laundering and fraud are rising among international buyers in the property market of Australia. This, according to a report released by the ABC

In 2015, a slew of new rules have been introduced. This includes substantial fines, visa checks, as well as forced sales so that illegal foreign investment could be kept from happening in the Australian housing market. One of the richest men in China, Mr Xu Jiayin, was given an order to sell his mansion in Point Piper amounting to $39 million within 90 days as he bought it without the Foreign Investment Review Board’s approval. It was announced by the Treasury that a number of properties purchased by foreigners were also under investigation for potential non-compliance with the rules by the Foreign Investment Review Board.

The banks in Australia have come under a lot of pressure following calls that their lending procedures for foreign property investors and buyers be improved and to be made more strict.. This includes the requirement of better documentation as well as asking for higher deposits. As a response, the banks have now come up with much more strict rules to ensure this does not happen again in the future.

This week, the Australia and New Zealand (ANZ) bank and Commonwealth Bank were joined by Westpac Bank in ceasing to lending money to any non-resident, even if the income of the applicant is not used as basis to meet serviceability. Aside from this, citizens of Australia and New Zealand, as well as permanent visa holders who have foreign income are kept under control when it comes to loans for new housing. They can only apply for a maximum loan to value ratio of seventy per cent, which was originally 80 per cent.

These banks have also places stricter rules when it comes to the required documents needed to apply for a loan. This includes providing income and passport documents, as well as the original visa.

Earlier this year, it was noted by the Reserve Bank that it was possible for property prices to decline and bank losses to increase of there is a significant decrease in Chinese demand, and this could be the beginning as the changes in the bank lending rules have already taken place.

Source: MigrationAlliance.com.au