Property developers have concerns local investors and home buyers could struggle to find finance for their off the plan purchases – bought over the past two years – but due now for settlement as banks toughen their lending criteria. “This is causing alarm across the industry,” said Tim Brown, chief executive of the Mortgage and Financing Association told the Australian Financial Review.
“Many of these are first-time buyers who will not be able to fulfil their finance obligation under the contract and will lose their deposit as many of the banks will not finance any investment loan over 80% and in some cases will not lend on investment at all,” Tim Brown said. Having put down a 10% deposit, apartment buyers typically arrange finance for the rest as the apartment nears completion – now set to find that finance has become both more expensive and harder to secure. Many lenders now require minimum 20% purchaser funding.
Bank are under pressure from the Australian Prudential Regulation Authority and the Reserve Bank of Australia to cool investment book activity to growth of less than 10%. An APRA spokesperson said its aim is to “reinforce sound lending practices by setting a threshold of 10 per cent growth in authorised deposit-taking institutions’ lending portfolios over a 12-month period”.