Chinese mortgage demand spikes

An increasing number of Chinese and overseas buyers are choosing to finance properties rather than pay cash. 

Andrew Taylor, co-chief executive at Juwai.com – a website that allows Chinese nationals to search for properties overseas – estimates that Chinese and other foreign buyers account for close to one in five new home sales.

“That’s not including Australians of Chinese origin,” Mr Taylor told Mortgage Business.

In May, Mortgage Business reported that Juwai.com had entered into an exclusive agreement to provide mainland Chinese mortgage leads to an Australian lender.

Mr Taylor said he is seeing increasing demand from overseas buyers looking to buy Australian homes and that the long-held belief that Chinese investors were predominantly cash buyers is being challenged.

"In the past, it was common for Chinese to just pay cash,” he said.

“That still happens, but many are now seeing the value of using leverage.

“Overseas Chinese who do finance in Australia tend to be more conservative than domestic buyers, with lower loan-to-value ratios.”

The NAB Residential Property Survey (Q3 2014) found that foreign-buyer demand for new properties increased during the third quarter, while demand for existing homes also edged higher.

The survey found that foreign buyers accounted for 16.8 per cent of total demand for new developments.

NAB expects demand to increase further next year to 17.3 per cent.

Mr Taylor said the biggest opportunity for financial institutions is not just with mortgages.

“You really make money when you serve them with the whole suite of financial and wealth management products,” he said.

“Many Chinese are eager to diversify their investments and investment advice to new sources outside of China.

“They look to Australia as a natural destination for their money."

Diversified financial services group Yellow Brick Road has seen a significant pick-up in Chinese demand.

YBR executive chairman Mark Bouris told the Australian Financial Review that a third of all mortgages written by the group last month were to Chinese investors.

“The foreign investment loans have been a feature in the past seven to eight years,” Mr Bouris said.

“It’s a big ratio at the moment and we get them verified in China with facilities we have,” he said. “They are supporting new developments.”

Meanwhile, Australia’s largest mortgage aggregator, AFG, said approximately 20 per cent – or one in five –home loans processed last month were to foreign investors.

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