Four big banks acting under pressure | CCG
When the ANZ bank announced its decision to clamp down on lending to overseas property buyers in April 2016, it was only a matter of time before the other big banks followed. Within months the CBA, Westpac and NAB had also curbed their lending.
The banks said they were acting under pressure from regulators and there were concerns from the RBA about the impact of foreign buyers on Australia’s property market. They said it was not intended to be anti-foreigner, but to address the problems caused by rising property prices.
Those in the know suggested that stopping one of the main drivers for off-the-plan apartment sales would be an economic disaster and have a devastating effect on the job market.
Creating Jobs for Australians
The stringent new loan application rules included reducing the loan-to-value ratio for borrowers relying on overseas income and demanding face-to-face meetings with loan applicants. Westpac stopped lending altogether to non-residents, temporary visa holders and self-employed individuals who derived earnings from overseas.
What the banks failed to tell Australians was that there were already regulations in place controlling overseas property investment and they were working quite well thank you very much. Controlled by the Foreign Investment Review Board (FIRB), investments were chosen that would create jobs for Australians and increase housing stock.
So, were overseas buyers really pushing up property prices? The answer is no. Research revealed that in 2014 for example, offshore Chinese property purchases only accounted for 2% of all transactions. What overseas buyers did achieve, though, was to help the construction industry recover and fill the economic gap left by a faltering mining industry.
Private Lending Fills the Gap
Bearing all this in mind, it was no surprise that non-bank lenders quickly stepped up to fill the void. Interestingly, they were immediately warned by the Big Four to back off. They didn’t.
Whilst we hear a lot about Asian investment in Australian real estate it should be made clear that many other countries also find the Land Down Under attractive, including the USA, New Zealand, Germany, South Korea, the UK, Netherlands and more.
By 2017 many foreign buyers were happily bypassing Australian banks and taking their business to private lenders, particularly in Melbourne. This was important as initially, the clampdown had seen Australia lose its position as the Number 1 choice for Chinese investors.
Foreign buyers bypassing Australian banks | CCG
Fast Decisions, Fast Funds
The lack of bank funding availability for non-resident mortgages has driven buyers into the arms of established private lenders, such as Credit Connect Group. Licensed by the Australian regulator ASIC to provide credit to consumers, CCG can finance short-term home loans from $100,000 to $1 million. They do this by either using their own funds or funds raised from an established network of private investors.
However, that doesn’t mean loan applications aren’t stringently assessed for viability. What it does mean is that suitable applicants get fast decisions and the funds to take important projects forward.
CCG is not a new lender; it has been an industry leader in peer-to-peer lending since 2006. As the name suggests, it’s more about connecting those who wish to borrow money with those who wish to invest.
Credit Connect Finance, the group operating as a private lender and licensed credit provider, has been operating since March 2017. It specialises in interest-only mortgages and non-resident home loans, including house and land packages.
Bright Future for Non-Bank Lenders
So, what does the future hold? Non-bank lenders are experiencing increasing demand for short and long-term finance from brokers, developers and overseas buyers. As the Banking Royal Commission continues to send shockwaves through traditional financial institutions, this can only go one way and that’s up.
A benefit of this increased business is that some non-bank lenders are now offering more products at lower interest rates. That’s good news for lenders, great news for borrowers and, in all likelihood, very bad news for the banks.
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This information is for general education purposes only and is not intended to constitute specialist or personal advice. It is not intended to be a complete statement of all information and has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should consider the appropriateness of the information to your own situation and needs before taking any action. It should not be relied upon for the purposes of entering into any legal or financial commitments.
Peter holds a Diploma of Financial Planning and is PS146 compliant. Credit Connect Finance Pty Ltd ACN 113 576 891 Australian Credit Licence 396190
Author Bio: Queensland-based business journalist Isobel Coleman considers the options for commercial property loans, commercial development loans, and loan for non-residents.