In recent months news of more loan curbs for foreigners by banks in Australia as well as higher stamp duty surcharge imposed by various States downunder has raised concerns for those with vested real estate interests in the country. In Sydney, New South Wales, foreign property purchasers will now pay a 4% stamp duty surcharge and in the Victoria State (where Melbourne is) this surcharge has now been raised from 3% to 7% since 1 July. Will property prices begin to correct going forward as demand from non-residents is reeled in?
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Since April this year, the big 4 banks – ANZ, The Commonwealth Bank of Australia (CBA), National Australia Bank (NAB) and Westpac have one by one stopped issuing loans to non-residents with 100% foreign income, with the last one to do so being NAB which came into effect on 18 Jun. They have also introduced more stringent measures for overseas lending like cutting down on the maximum LVR (loan-to-value ratio) for non-residents from 80% previously to 60-70%. They have shut the door completely on those with foreign income of a self-employment nature and disallowed lending to properties in company names. Some like NAB will now take a haircut on foreign income in the credit assessment of up to as much as 40% thereby substantially reducing the amount of loan available for purchase. Westpac has completely stopped lending to all non-residents and temporary residents.
The big 4 Australian banks with operations in Singapore still made available their lending to Singaporean investors through their Singapore branches. However as these operations are in Singapore they would be subjected to loan curb measures here like the TDSR (Total Debt Servicing Ratio).
There are more woes for investors who are foreign to both Australia and Singapore and are unable to obtain financing from their home countries. Some might have to pull back on their purchase intentions. We do have a few banks here in Singapore that could still cater to this segment of people who are unable or who do not wish to fork out large sums of cash to make a full cash purchase in Sydney, Melbourne or Perth – the 3 major cities where financing are available from Singapore banks. Do speak to our consultants today and we will help you with the best option avaible in the market and the required documentations.
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In terms of income qualification most banks in Singapore will go by the usual assessment for non-Singapore denominated foreign income: namely at least 3 months of monthly payslips with matching bank statements showing the salary crediting, as well as official tax returns from the various regimes. Most banks do take a haircut to account for the higher risk involved in overseas lending, ranging from 5% to 20%. LVR might still be at 80% especially for those with solid income profiles and clear documentations, but do expect most banks to be more comfortable at 60%.
In cases where income fell short for the required loan quantum, banks here can still lend by way of liquid assets parked and pledged in Singapore where additional income is “derived” by applying a certain formula. This might still make sense for foreign investors who see the strong Sing dollar as a safe haven currency especially if it continues to remain relatively strong to Aussie dollar in the near term with US Fed’s impending monetary tightening policy going into 2017 at a time when Reserve Bank Of Australia (RBA) has just cut its cash rate to an all time low of 1.50%!
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