Westpac puts foreign property buyers on the chopping block

Westpac has announced that it, and its subsidiaries, including St. George, Bank SA and Bank of Melbourne, will no longer be lending to foreign property buyers.

One of Australia’s big four banks, Westpac is following in the footsteps of fellow banking giants the Commonwealth Bank and ANZ, which also tightened standards for offshore investors and temporary residents looking for a home loan. ANZ recently began refusing applicants with completely foreign income sources, while CBA stopped accepting home loan applications from temporary residents with only foreign income, the Australian Financial Review reported.

A Westpac representative said in a statement that, “In line with Westpac Group’s responsible lending practices, we have strengthened our policies regarding non-residents lending and foreign income, which represent a very small component of our loan book.”

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While Australia is currently undergoing a boom in the construction of new apartments, this market is largely driven by foreign buyers, who the RBA identified recently as “accounting for a significant and increasing share of purchases” in the Aussie property market. Many of these foreign buyers borrowed from local banks to fund property purchases.

Smh.com.au reported that Urban Development Institute of Australia chief executive Danni Addison felt the tightening standards would cause some Aussie apartment projects to struggle.

"If undersupply results from an increase in the number of projects that are unable to commence, we will see dwelling prices increase and availability decrease, not only for foreign investors but for Australians as well," she was quoted as saying.

Westpac also clamped down on lending to Australian citizens or permanent visa holders whose main sources of income were foreign. These borrowers can now secure a loan of only 70% of a property’s value.

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