CBA says foreign investors driving Melbourne apartment ‘bubble’

The chief financial officer of Australia’s largest lender has clarified the bank’s stance on lending to foreign investors and the impact they are having on certain segments of the market.

Speaking at the Bloomberg Summit in Sydney last week, CBA chief financial officer David Craig confirmed that the nation’s biggest bank does not actually lend to foreign investors.

“We only lend to people living in Australia because we need to ascertain and verify their income,” Mr Craig said.

“Chinese investors that are investing in Australia, firstly I think most of them, frankly, are investing with cash and don’t want to borrow,” he said. “But to the extent that there are offshore people who do want to borrow, they don’t borrow from us.”

Mr Craig said the foreign investors are having a clear impact on certain housing markets.

“At the fringe in some aspects of the market, for example inner-city apartments in Melbourne, it is clear that there has been a fairly high percentage of foreign investors that are probably contributing a little bit to the bubble in that particular market,” he said. “So it is a matter from our point of view of just being conscious of the type of investors and the impact they are having on different parts of the market.”

CBA is not alone in monitoring the impact of foreign investors. St. George Bank told mortgage brokers in September that the group is monitoring certain postcodes and areas where lending could be riskier.

“If there are more SMSF properties being purchased in particular areas, or if non-resident lending is driving unit sales, for example,” St. George Bank head of credit Rob Love said.

“That’s what we’re doing at the moment – spending a lot of time looking at [a] postcode analysis to explain what the real hotspots in our portfolio are.”

Meanwhile, NAB has warned brokers about foreign investment deals following government changes.

NAB Broker general manager Steve Kane said “massive changes” in the Australian mortgage market mean brokers need to take special care with the loans they write for foreign property investors.

“It very important that you understand, particularly in the Sydney market where you’ve got rapidly increasing investment lending and rapidly increasing property prices, that if you’re dealing in those markets, particularly around foreign investment, that you understand the rules and regulations,” he said.

“It is important because as the person involved in the transaction, it just doesn’t go to the bank or to the customer, it will come to you as well if you haven’t adhered to the rules and regulations that have already been in place, particularly around foreign investment and investing by foreign nationals.”

The latest NAB Residential Property Survey found that foreign buyers were more active in new property markets in the third quarter of 2015.

According to the survey, foreign buyers accounted for 15.7 per cent of new property demand, up from 12.8 per cent in the third quarter.

In Victoria, foreign buyers were significantly more active and accounted for one in four (25.2 per cent) new property transactions. By comparison, foreign buyers accounted for 17.7 per cent of new property transactions in Queensland, 13.6 per cent in NSW and 8.3 per cent in WA.

[Related: Melbourne's auction market supremacy continues]

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