The NAB is the latest bank to tighten its lending conditions for Chinese buyers and it could mean delays for dozens of impending settlements.
The tightening from NAB comes in the form of a 10 per cent drop in loan-to-value (LVR) requirements, from 70 down to 60 per cent.
NAB will also recognise just 60 per cent of income earned overseas amid fears Chinese buyers have been inflating their earnings to try and borrow more.
An unnamed mortgage broker told Australian Financial Review it will mean most Chinese buyers will now only be able to borrow around $200,000.
She said she had around 40 clients waiting on settlement on newly built apartments and the new rules put them in doubt.
NAB says the changes come into effect on May 14 and announcements will be made in the coming days.
“These loan settings are continually reviewed and controls are tightened where necessary,” NAB stated.
“NAB has limited appetite for this segment which comprises less than 2 per cent of the NAB book.”
Furthermore, NAB say they will also restrict mortgage discounts to foreign buyers and will avoid any high-risk areas.
While not specifically identified, this could well include inner-city Melbourne areas where apartments are in oversupply.
The wariness surrounding foreign lending mainly stems from the difficulties verifying potential borrowers’ identities, income and assets.
The Australian Financial Review reported this week that ANZ and Westpac had approved hundreds of fraudulent loan applications to Chinese property buyers.
While the loans had relatively low default rates, banks were still concerned they didn’t know their customers and were vulnerable to loan default if housing prices fell sharply.
According to investment bank Credit Suisse Chinese buyers spent $12.4 billion on Australian residential property last financial year and bought 15 per cent of all new homes.