Chinese buyers fuel Aussie housing boom

Almost one third of the home loans written in September by a mortgage provider part-owned by Macquarie Group Ltd were to Chinese investors, according to the chairman of the firm.

Yellow Brick Road Holdings Ltd, 18.4 percent owned by Macquarie, lent A$320 million ($281.6 milllion) to Chinese investors out of a total A$1.1 billion in disbursements last month, said Mark Bouris, meaning the proportion of Chinese borrowers has doubled in the past year, he said. Australian lenders and property developers are gaining from the surging demand, because China's housing market is faltering.

Chinese buyers overtook Americans to become the biggest buyers of real estate in Australia in the 12 months to June 2013, investing A$5.9 billion into commercial and residential property, a 42 percent increase from the previous 12 months, according to Australia's Foreign Investment Review Board.

"The foreign investment loans have been a feature in the past seven to eight months," Bouris said.

Yellow Brick Road's Chinese customers tend to borrow only about half of a property's value, paying the rest up front, he said, and there have not been any signs of arrears building up on the loans, which are in the range of A$350,000 to A$750,000, Bouris said.

Following the recent expansion, growth is now flattening out, he said.

Outstanding Australian mortgages climbed 6.7 percent in the year to Aug 31, the fastest pace since February 2011, according to Reserve Bank of Australia data.

Dwelling prices, pumped up by the RBA keeping its benchmark interest rate at a record low 2.5 percent for more than a year, climbed 9.3 percent across the country in the 12 months through September, according to the RP Data CoreLogic Home Value Index.

The rise in prices and an increase in investor activity prompted the central bank to say on Sept 24 that it was discussing possible measures with other local regulators to strengthen lending practices.

RBA Assistant Governor Malcolm Edey said on Oct 2 he expected a preliminary announcement on actions that banking supervisors may take before the end of the year.

The Australian Prudential Regulation Authority, which regulates the country's banks, altered mortgage verification standards about six months ago, Bouris said.

Yellow Brick Road has arranged mortgages worth about A$27 billion, with 40 percent of the volume on Macquarie's books and the rest through other lenders, he said. Australia had A$1.3 trillion in outstanding mortgages as of Aug 31, according to RBA data.

If Sydney's home prices continued to grow by more than 10 percent a year, Bouris said the government will probably attempt to try and slow down the housing market.

Australian lawmakers are also conducting an inquiry into foreign buying of Australian residential property by seeking to determine, among other things, whether foreign investment in real estate is causing distortions and making housing less affordable.

Bouris said that demand from offshore buyers is good for the Australian economy, contributing to a housing boom that's creating jobs. "Builders, plasterers, real estate agents are all busy," he said. "Its actually not a bad market."

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