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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 (4,046 Views)
economist
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Just how does this occur?

How do the the loans get vetted in terms of income and the ability to repay.

Do these chinese investors have australian incomes?

I have purchased and invested in a few O/S properties and where a mortgage was required the bank needed to see evidence of income in the currency where the loan was taken out.

Peter can you fill in the blanks here please?
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peter fraser
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economist
23 Oct 2014, 11:34 PM
Just how does this occur?

How do the the loans get vetted in terms of income and the ability to repay.

Do these chinese investors have australian incomes?

I have purchased and invested in a few O/S properties and where a mortgage was required the bank needed to see evidence of income in the currency where the loan was taken out.

Peter can you fill in the blanks here please?
Overseas buyers can buy here even if their major income source is in another country. The income needs to be proven though. For an English speaking country that's pretty easy. EG I have done loans for expat Aussies working in Ireland, and in the Middle East.

There is some difficulty with pay slips and tax returns in foreign languages especially Asian languages, they need to be interpreted by a qualified interpreter, but it can be done. Expats working overseas have it much easier, but a foreigner certainly can buy.

Because the income is overseas, usually it is reduced by 20% to allow for that added risk, and then reduced by 20% again to cater for currency fluctuations.

I can copy and paste the policy of a major if you PM me.

There are obstacles but the big four will entertain them usually up to 80% LVR. Has to be strong F/P but that's not difficult for many O/S businessmen, they are strong.

I rarely see these loans, which is why I question the one in three numbers for YBR - they must have an office in every major city on mainland China and be actively chasing the business.

Note that I'm not talking about Australians or Australian residents of Chinese ancestory.
Edited by peter fraser, 24 Oct 2014, 12:25 AM.
Any expressed market opinion is my own and is not to be taken as financial advice
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Lef-tee
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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.
There seems plenty of evidence to suggest that they are increasing in numbers though and are becoming a not insignificant buying force.
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Glenn Stevens
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Lef-tee
24 Oct 2014, 06:19 AM
There seems plenty of evidence to suggest that they are increasing in numbers though and are becoming a not insignificant buying force.
Foreign investors may be helping to push up the prices of some Australian homes, but are probably not crowding out first home buyers, in my view. I've heard anecdotal claims some local buyers are being priced out of the market by cashed-up overseas investors. But foreign investment in residential housing was at most 5 to 10 per cent of market turnover, and last year the government approved $17 billion in property investment from overseas, with most of the money funding the purchase and construction of new homes. I'd also note that foreign investors' share of the market has remained fairly steady over the past two decades. I think we can conclude that overseas buyers were not the main reason for the recent run-up in prices.
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peter fraser
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Lef-tee
24 Oct 2014, 06:19 AM
There seems plenty of evidence to suggest that they are increasing in numbers though and are becoming a not insignificant buying force.
Most certainly you are right, the number of foreign buyers and the proportion seem to be at a record high, but it's not 30% of buyers.

My question remains, what is YBR doing that is so different to other finance providers. Remember YBR are not lenders, they are mortgage brokers who rebrand white label Macquarie Bank loans as their own product.
Any expressed market opinion is my own and is not to be taken as financial advice
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Lef-tee
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peter fraser
24 Oct 2014, 07:34 AM
Most certainly you are right, the number of foreign buyers and the proportion seem to be at a record high, but it's not 30% of buyers.

My question remains, what is YBR doing that is so different to other finance providers. Remember YBR are not lenders, they are mortgage brokers who rebrand white label Macquarie Bank loans as their own product.
You are probably right in thinking that they have agents in Asia aggressively marketing Sydney and Melbourne real estate to the well off looking for an investment.

I did hear something about that some time ago but I can't remember exactly where.

Exactly what portion they make up is not clear, partly due to the opacity of the FIRB but I doubt it would be a third. The numbers do bear watching though because they seem to be strongly expanding.

Unlike Houses and Holes, I doubt that effective macroprudential will actually be introduced but if it were, it probably wouldn't affect these buyers anyway and may simply advantage them further.
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miw
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Lef-tee
25 Oct 2014, 07:47 AM
You are probably right in thinking that they have agents in Asia aggressively marketing Sydney and Melbourne real estate to the well off looking for an investment.

I did hear something about that some time ago but I can't remember exactly where.
I can confirm that at least some people are marketing Aussie real estate in China. There is an Aussie real estate fair on in one of the major hotels here nearly every week. I should pop by one day and see if the finance part of the package is YBR.
Edited by miw, 25 Oct 2014, 04:41 PM.
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peter fraser
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Lef-tee
25 Oct 2014, 07:47 AM
Unlike Houses and Holes, I doubt that effective macroprudential will actually be introduced but if it were, it probably wouldn't affect these buyers anyway and may simply advantage them further.
No it won't make a zot of difference to overseas buyers, they already comply with some strict lending guidelines.

Any expressed market opinion is my own and is not to be taken as financial advice
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Lef-tee
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miw
25 Oct 2014, 04:41 PM
I can confirm that at least some people are marketing Aussie real estate in China. There is an Aussie real estate fair on in one of the major hotels here nearly every week. I should pop by one day and see if the finance part of the package is YBR.
Given that there are easily enough well off Chinese to buy every last house in Australia, I think the situation definately bears closely keeping tabs on. This is very difficult of course, again because the opacity of the FIRB leaves us with mainly anecdotal evidence to go on.

I'm not suggesting that every last house in Australia actually will be snapped up by such buyers of course, that's not going to happen.

But I can entertain the notion that it may be possible for foreigners with much deeper pockets than the average Aussie to buy up enough residential property to help place further upward pressure on prices in general.

Those who argue that most FHBers have simply set their sights too high may not have factored into their thinking the possibility of Australian housing becoming ever more an international speculative plaything - FHBers may not be just trying to compete with domestic investors but also ultimately with well-heeled foreigners whose numbers exceed the entire population of this country.

Standing back an looking at it, I think it's pretty obvious that egalitarian notions regarding the ability of working Aussies to own their own home have become subjugated to the profit motive. We are encouraged to think of housing as a growing pile of dollars first and a place to live second. The results are predictable.
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peter fraser
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Lef-tee
26 Oct 2014, 06:51 AM
Given that there are easily enough well off Chinese to buy every last house in Australia, I think the situation definately bears closely keeping tabs on. This is very difficult of course, again because the opacity of the FIRB leaves us with mainly anecdotal evidence to go on.

I'm not suggesting that every last house in Australia actually will be snapped up by such buyers of course, that's not going to happen.

But I can entertain the notion that it may be possible for foreigners with much deeper pockets than the average Aussie to buy up enough residential property to help place further upward pressure on prices in general.

Those who argue that most FHBers have simply set their sights too high may not have factored into their thinking the possibility of Australian housing becoming ever more an international speculative plaything - FHBers may not be just trying to compete with domestic investors but also ultimately with well-heeled foreigners whose numbers exceed the entire population of this country.

Standing back an looking at it, I think it's pretty obvious that egalitarian notions regarding the ability of working Aussies to own their own home have become subjugated to the profit motive. We are encouraged to think of housing as a growing pile of dollars first and a place to live second. The results are predictable.
It's a little ambiguous whether 30% of loans were written for Chinese nationals or whether 30% was written for people of Chinese ancestry some of whom are Chinese nationals.

Read this - http://www.brokernews.com.au/news/breaking-news/chinese-investors-account-for-a-third-of-mortgages-franchise-says-193147.aspx

I'm not sure whether it was a sweeping statement by Bouris. I mean who keeps records of the ancestry of buyers who hold Australian citizenship. That would be absurd. If Bouris has figures at all it would be from their marketing department, or deals written that were sourced in Mainland China. There is nothing in the lending process that counts these stats, but YBR would have marketing stats that records the source of the application.

I have no doubt that there are a lot of Foreigners in the market at the moment many of whom are Chinese, but 30% just doesn't sound right to me.

Any expressed market opinion is my own and is not to be taken as financial advice
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