Time for Treasurer Scott Morrison to review FIRB 100% off the plan allowance

Sydney real estate needs foreign investors but Australian regulators may be giving them an unintended advantage over local investors and home buyers.

Especially now that one of China's biggest financial institutions has started offering zero-deposit home loans for off-the-plan apartments in Australia.

The banking division of PingAn Insurance unveiled its offering to Chinese investors in Shanghai last week, charging around its credit card rate of 14 per cent, Fairfax Media reported.

"Join hands with PingAn and realise your overseas property dream," the marketing advised.

"Become an Australian property owner with zero down payment," the marketing added.  

Hardly the borrowing practices that the Australian Prudential Regulation Authority and the Reserve Bank of Australia want.

With increasing impact since last December, our regulators have sought to cool the property market here in Sydney, and elsewhere on the east coast, with tighten lending practices on local banks for Australian property investors. 

APRA requirement for local banks to contain growth in investment lending to 10 per cent a year has triggered an emerging constraint within property markets. Some banks have doubled the deposit to 20 per cent for those investing in off the plan property. Other banks have stopped lending at all. 

Australian regulators are powerless to prevent the lending practices of offshore banks. And PingAn is no small outfit - ranked 96 in U.S. Fortune Magazine’s Global 500 Leading Companies ranking and 1st among China’s non-State owned enterprises. 

But these zero deposit loan offerings confirm the concerns highlighted in the recent past by leading mortgage broking chief John Symond. 

For many months John Symond has worried that the APRA investor home loan lending crackdown would have unintended consequences given the huge increase in non-Australian residents buying property.

"You might find these foreign investors have even a bigger go because regular Australians are going to find it tougher to get through the hoops to be able to borrow money to buy an investment property," John Symond, the founder and chairman of Aussie Home Loans suggested.

"Without picking on the Chinese, they have had a huge spike on new housing something like $12 billion in last 12 months - now this doesn't come under APRA as a lot bring money from China. 

"They are certainly help driving the pricing up and driving the shortage of properties available for first home buyers and people looking to buy their home in Australia."

John Symond then fronted the Federal parliamentary inquiry into home ownership where he noted it was "very easy to play at the edges and talk about APRA tightening up lending restrictions for investors, but what about the 20 to 25 per cent, in some areas 30 per cent, of foreign buyers who predominantly don’t borrow here?"

Mr Symond noted Chinese investors are unable to buy freehold property at home so are attracted by the Australian market with new measures such as a foreign investors fee of $1000 per million dollars invested not expected to dissuade the Chinese purchasing influx.

There was a previous policy that property developers were restricted to selling 50% of any new off the plan development to foreign investors. But during the global financial crisis the Rudd changed the ratio to 100% where it is still today. 

Perhaps it is time for Treasurer Scott Morrison to review the playing field.

This article was first published in the Saturday Daily Telegraph.