Chinese Demand for Aussie Mortgages Boosts Macquarie Firm

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.”