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One third of home loans written by Yellow Brick Road Holdings were to Chinese investors; $320 million lent to Chinese investors out of a total $1.1 billion
Topic Started: 23 Oct 2014, 05:03 PM (4,044 Views)
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Chinese Demand for Aussie Mortgages Boosts Macquarie-Backed Firm

Narayanan SomasundaramOct 20, 2014 8:14 pm ET

Oct. 21 (Bloomberg) -- Almost a third of the home loans written in September by a mortgage provider part-owned by Macquarie Group Ltd. were to Chinese investors, the chairman of the firm said.

Yellow Brick Road Holdings Ltd., 18.4 percent owned by Macquarie, lent A$320 million ($281 million) to Chinese investors out of a total A$1.1 billion in disbursements last month, Mark Bouris said yesterday in Sydney. The proportion of Chinese borrowers has doubled in the past year, he said.

Australian lenders and property developers are gaining from surging demand out of China, where the housing market is faltering. Chinese purchasers overtook Americans to become the biggest buyers of real estate in Australia in the 12 months through June 2013, plowing A$5.9 billion into commercial and residential property, a 42 percent increase from the previous 12 months, according to the Foreign Investment Review Board.

“The foreign investment loans have been a feature in the past seven to eight months,” Bouris said. “It’s a big ratio at the moment and we get them verified in China with facilities we have. They are supporting new developments.”

Yellow Brick Road’s Chinese customers tend to borrow only about half of a property’s value, paying the rest up front, he said. There haven’t been any signs of arrears building up on the loans, which are in the range of A$350,000 to A$750,000, according to Bouris. Following the recent expansion, growth is now flattening out, he said.

Price Gains

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 Sept. 24 it is discussing possible measures with other local regulators to strengthen lending practices. RBA Assistant Governor Malcolm Edey said Oct. 2 he expects a preliminary announcement on actions that banking supervisors may take before the end of the year.

Stricter Standards

The Australian Prudential Regulation Authority, which regulates the banks, altered mortgage verification standards about six months ago, Bouris said. APRA wanted lenders to pay closer attention to a potential borrower’s job tenure and savings pattern, he 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 home prices continue to grow by more than 10 percent a year, the government will probably try to slow down the housing market, Bouris said.

Australian lawmakers are also conducting an inquiry into foreign buying of Australian residential property. They are 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.

“The builders are busy, plasterers are busy, bricklayers are busy, suppliers are busy, real estate agents are busy, lenders are busy,” he said. “It’s actually not a bad market.”

Read more: http://washpost.bloomberg.com/Story?docId=1376-NDQC0P6KLVRX01-2Q7LVJVOELRDMU475L21PN2Q00
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Emmanuel
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Make hay while sun shines. There is no shortage of money coming out of China. Might as well juice it up.
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Emmanuel
23 Oct 2014, 05:07 PM
Make hay while sun shines. There is no shortage of money coming out of China. Might as well juice it up.
Looks like the record overbuilding will be going on for a bit longer yet.

Might be some downward pressure on rents for some time.
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GloomBoomDoom
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Do people actually believe it won't end badly or do they just not care?
MSE
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herbie
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GloomBoomDoom
23 Oct 2014, 06:01 PM
Do people actually believe it won't end badly or do they just not care?
Rock and hard place for the RBA just maybe?

Interesting that "Chinese purchasers overtook Americans to become the biggest buyers of real estate in Australia in the 12 months through June 2013, plowing A$5.9 billion into commercial and residential property".
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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GloomBoomDoom
23 Oct 2014, 06:01 PM
Do people actually believe it won't end badly or do they just not care?
Might not be so bad for those looking for cheaper prices and rents in future.

It would appear all these so called inveztors are just subsidising cheaper and cheaper rents for people.

On just two sites not far from me, there are 6,000 units planned and well underway.

Big developers that get in and then out before the ponzi blowz will do well. But I see many johnny come latelys will be left in a mess.

Hopefully we can keep pumping this for a while yet.
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peter fraser
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GloomBoomDoom
23 Oct 2014, 06:01 PM
Do people actually believe it won't end badly or do they just not care?
No one else is seeing these numbers. Either the numbers are incorrect, or YBR have target marketed Chinese investors, probably at the source.
Any expressed market opinion is my own and is not to be taken as financial advice
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peter fraser
23 Oct 2014, 10:04 PM
No one else is seeing these numbers. Either the numbers are incorrect, or YBR have target marketed Chinese investors, probably at the source.
You mean you don't want to see them Peter.

Dont quite match your plans.

With Brisbane units down over the quarter and also the year and house price drops over the quarter being half that of the yearly gain.

Don't think all that record overbuilding will help to much either.
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Ex BP Golly
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peter fraser
23 Oct 2014, 10:04 PM
No one else is seeing these numbers. Either the numbers are incorrect, or YBR have target marketed Chinese investors, probably at the source.
Maybe they're Meriton Mates?
WHAT WOULD EDDIE DO? MAAAATE!
Share a cot with Milton?
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peter fraser
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23 Oct 2014, 10:14 PM
You mean you don't want to see them Peter.

Dont quite match your plans.

With Brisbane units down over the quarter and also the year and house price drops over the quarter being half that of the yearly gain.

Don't think all that record overbuilding will help to much either.
Nope, it all suits me just fine Ted. It's like I scripted it.
Ex BP Golly
23 Oct 2014, 10:18 PM
Maybe they're Meriton Mates?
How are the sales going on the Infinity Tower??
Edited by peter fraser, 23 Oct 2014, 11:03 PM.
Any expressed market opinion is my own and is not to be taken as financial advice
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