Demand for loans from Chinese investors in Australian real estate is holding up, says Asia-focused bank HSBC, despite the local banks clamping down on foreigner property buyers.
 

Chinese buyers of Australian property have surged in recent years, investment approvals show, such that an abrupt slowdown in demand from China is now seen as a potential risk to house prices in some markets, especially inner-city apartments in Sydney and Melbourne.

 

In recent months, there have been warnings from the credit rating agencies that moves by the major banks to clamp down on lending to foreigners may slow demand from these buyers.

But HSBC's head of retail banking in Australia Graham Heunis said on Tuesday the bank's lending to foreigners was "steady" after it experienced a brief "blip" in demand for credit in response to the majors' clampdown.

 

 

"We are actually seeing it is very steady," Mr Heunis said in response to a question on the amount of Chinese investment in domestic residential property.

"We saw a bit of a blip, but it's pretty much stabilised, we've not seen a major change in the percentage of our volume coming in from offshore," he said at a media briefing.

 

The comments came as figures on Tuesday suggested new lending to property investors had been resilient in recent months, supported by the Reserve Bank's cuts to interest rates this year.

 

Westpac, National Australia Bank, Commonwealth Bank and ANZ Bank all put the brakes on lending to foreign buyers earlier this year.

 

 

At some lenders, there have been concerns of fraudulent overseas loan applications, causing local banks to tighten their approval processes and slash how much they will lend overseas buyers.

HSBC did not have this problem because it was able to verify loan applications with its own staff in China, where it is the biggest foreign bank. In Australia, it is relatively small in mortgage lending and has a loan book of about $10 billion, which is mostly lending to domestic clients.

 

 

Meanwhile, figures on Tuesday showed the number of loan approvals for owner-occupiers dipped 3 per cent in August, but lending to property investors edged up 0.1 per cent.

Commonwealth Bank economist John Peters said lending to investors had been relatively resilient in recent months, helped by falling interest rates.

With stronger auction clearance rates in Sydney and Melbourne, there are predictions housing investors are returning to the market, which could re-ignite a debate about whether these parts of the country face a speculative housing bubble.

"The August RBA rate cut could see a further acceleration in lending growth to investors in coming months," Mr Peters said.

There is little official data on Chinese investment in Australian property. The Reserve Bank said in April it was a small portion of all properties, but made up a "significant and increasing share of purchases", especially of off-the-plan apartments in Melbourne and Sydney.

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