Australian lenders freeze housing loans, triggers property funding crisis

By @vitthernandez on
Melbourne Apartments
A view of apartment blocks at Docklands in Melbourne December 2, 2008. Reuters/Mick Tsikas

The gradual recovery of Australia’s house prices could be stymied by a property funding crisis. The crisis is triggered by new borrowing rules imposed by local banks on foreign and Australian purchasers of apartments.

The Australian Financial Review reports that Shanghai-based financiers have been complaining that funding of the Chinese clients from Australian banks were frozen. Their only recourse is to foreclose the property or borrow at usurious interest rates from private financiers.

The problem is not limited to Chinese buyers of Australian apartments. Local clients of Australian financiers, mostly Asians, have also complained of their settlements being deferred by three months to find alternative sources of funding. Because all deals have been frozen, discloses Mark Yin, agent with Home Tree Group, based in Shanghai, financiers are now scouring for new financing from all over the world.

The move affected almost all his clients waiting for completion of properties in Australia which are mostly flats in the Melbourne commercial business districts, Yin says. Most of these apartments are sold off-the-plan in which purchasers buy the units on a pre-selling with a deposit and complete payments when the property is finished. But it needs a second valuation and lender’s financing commitment.

Given the freezing of almost all loans, Marshall Condon, chief executive of Neue Black, a mortgage lender based in Melbourne, warns that in the next three to 12 months, investors would start to be more concerned because that would be the time when many buyers will start applying for funding to complete their deals. However, funding is expected to be limited by then.

However, the Sydney Morning Herald reports that the Australian Super is financing commercial property projects up to $150 million in value. The find is the biggest industry super find in the country and has partnered with real estate financier large-scale loans direct to developers in the commercial property sector. The fund has over $100 billon of members’ fund under its management.

VIDEO: Chinese buyers drive higher prices in Australia property market

Source: CCTV New