Finance companies, other non-bank lenders and Chinese banks remain open to foreigners seeking mortgages to help buy NZ property

Finance companies, other non-bank lenders and Chinese banks remain open to foreigners seeking mortgages to help buy NZ property

By Gareth Vaughan

Although the country's big four banks closed the door on mortgage seeking foreigners with offshore income last month, or left it ajar in ANZ's case, there are still plenty of other avenues available for such borrowers.

Some of these include a range of local finance companies and non-bank lenders who, interest.co.nz has been told, have seen an increase in borrower interest since the big bank crackdown.

To recap; in quick succession last month all of Westpac, ANZ, BNZ and ASB announced a range of moves to restrict or stop offering residential mortgages to non-NZ residents using offshore income in their mortgage applications. HSBC too tightened the screws saying: "We have recently tightened up our non-resident lending policies to prioritise lending to existing HSBC Group customers where the majority of their income is sourced in New Zealand. We are currently not accepting applications for home loans from new customers who receive a majority of their income from overseas."

Chinese buyers remain active

Overseas property buyers with offshore income, including from China, certainly remain interested in borrowing to buy NZ properties. Here’s one recent example interest.co.nz has heard about.

The financing sought is to fund 65% of the purchase price of two Auckland CBD apartments. The buyer is a salaried staff member of a Beijing construction company. He arranged finance through one of the big four NZ banks in 2013 to buy a house on Auckland’s North Shore, and subsequently opened three accounts with the bank. 

Assisted by a South Island-based lawyer, he has now signed a sales and purchase agreement to buy the two apartments. The sale was conducted via an Asian real estate company and brokerage via Melbourne. The man also has a Melbourne lawyer, although his statement of position shows he owns no Australian properties. 

The deposit for the Auckland apartments has been paid into the Melbourne lawyer’s trust account via three or four names that do not include the actual purchaser. The contract is now unconditional. The purchaser has a reference from his boss, and claims to have Chinese documents confirming his salary and home address etc.

NZ bank statements show two deposits of more than $70,000 made, plus one of more than $10,000, from people with Chinese names that don’t include that of the actual account holder.

In China, individuals are restricted to exchanging the equivalent of US$50,000 into foreign currency annually. However, the Chinese have proven to be creative at finding ways of getting money out of their homeland.

One suggestion is that some Chinese property buyers follow a similar route to that outlined above in that they set up bank accounts, have friends make chunky deposits into their NZ bank account, then pay down the principle on their mortgage from their NZ account. Within a relatively short timeframe some are thus able to own a NZ residential freehold property, potentially earning regular tax free returns. (The Government did move last year to make foreign property buyers register with the Inland Revenue Department and have a NZ bank account).

Mum's the word

Interest.co.nz has been told that, perhaps not surprisingly, since the big banks' crackdown other lenders have seen an increase in interest from offshore borrowers with foreign income. Those seeing greater demand are said to include ASAP Finance, DBR Property Finance and First Mortgage Trust. 

When approached for comment all three broadly declined to do so.

Here's what ASAP Finance director Darpan Patel said: "Sorry to be unhelpful but ASAP Finance has a strict policy of not commenting about anything in the media so even though your questions are very general and straightforward, I would prefer not to comment. Sorry again." ASAP Finance's website doesn't say how the business sources its funding and nor would Patel say. However, interest.co.nz understands it's privately funded.

DBR Property Financiers director Darryl Eastgate: "We are so small I don't see how our market share could impact any 'wider market' opinion. It will be too anecdotal." DBR's website says it's funded through $10 million of "cash equity", plus a $40 million ASB loan facility.

And First Mortgage Trust CEO Tony Kinzett said he was just back from holiday, didn't have time to comment and no one else from First Mortgage Trust could. Kinzett did say, however, that generally speaking the whole financial services market was going very well. First Mortgage Trust's website says its investment fund currently stands at approximately $300 million, adding "that is over 2,000 people who know a smart investment when they see one!"

These lenders charge higher interest rates than the banks, some offer low-doc loans, and none fall under the Reserve Bank's non-bank deposit taker regime.

ASAP Finance's website notes a three month base rate of 7.95%, and says its loan terms are generally three to 12 months but can both be longer and rolled over.  DBR promotes floating rates of 8.95% to 11.95%, and touts "regulated loans" for homeowners. These have fees of $1,500 to $2,500 and interest rates of 10.95% to 12.95%. First Mortgage Trust's interest rates start from 6.70%. See all banks' advertised, or carded, home loan interest rates here.

Increased demand at Resimac

Adrienne Church, general manager of mortgages at Resimac, was more forthcoming. Church said Resimac was seeing an increase in demand in a range of areas with the banks tightening up.

"We’re probably seeing more demand in the investor space at the moment, not limited to offshore borrowers. We’re also seeing a lot of demand in the Auckland region, [the] 70-80% LVR space with the banks not doing that either. Also with the banks ‘defining’ any cashout/equity release for investment purposes even if the security is the OO [owner-occupied] property, we’re getting a lot of that," Church said.

"We will do some offshore borrowers on a case by case basis if the deal is strong enough i.e. the rent covers the mortgage payments. If the RBNZ rolls out the [Auckland LVR investor] speed limits to the rest of the country, or at least to Hamilton and Tauranga which are seeing strong growth, we’ll probably see more of this business too," Church added.

Resimac's funding comes from wholesale sources and residential mortgage backed securities through its Australian parent.

ASAP, DBR and Resimac are supervised for compliance with the Anti-Money Laundering and Countering Financing of Terrorism Act by the Department of Internal Affairs. First Mortgage Trust is supervised by the Financial Markets Authority. Banks are supervised by the Reserve Bank.

Chinese banks providing home loans to customers with overseas income

Other NZ banks remain options for would-be overseas house buyers with offshore income seeking mortgages. These, of course, include the three Chinese government controlled banks granted banking registration by the Reserve Bank in 2013-2014.

A spokeswoman for ICBC says her bank does accept overseas income for borrowers on a case by case basis. Documentation and types of security are key areas ICBC checks, the spokeswoman added. As recently reported by interest.co.nz  ICBC grew residential mortgages by almost $19.6 million, or 19.1%, to $121.992 million in the March quarter. Of ICBC's total mortgage book just under $58 million, or about 47.5%, has gone to investors, and a shade under $64 million, or about 52%, is to owner-occupiers. 

China Construction Bank, meanwhile, grew housing loans $33.315 million, or 46.2%, to $105.276 million during the March quarter. A spokesman for China Construction Bank said it too continues to provide home loans to customers with overseas income.

"We also have a robust credit process with specific criteria in the servicing, security and personal credit history. Supporting information must be supplied as part of the verification process which we are able to confirm locally and within the CCB group network. This we believe is a distinct advantage for CCB over some other banks," the China Construction Bank spokesman said.

Bank of China's latest general disclosure statement doesn't detail any residential mortgage lending, although it does promote mortgage rates on its website. A spokeswoman for Bank of China says it does accept overseas income in mortgage applications.

For some size comparison to the ICBC and China Construction Bank mortgage books, Bank of Baroda and Bank of India, who have been registered in NZ since 2009 and 2011 respectively, held $46.8 million and $36.5 million worth of mortgages, respectively, as of March 31. According to Reserve Bank statistics, total housing loans stood at $219.563 billion at the end of May.

Growth limits

In its annual Financial Institutions Performance Survey released in February, KPMG noted the local incorporation status of the three Chinese banks means they are subject to restrictions on related party exposures imposed by the Reserve Bank as part of their conditions of registration.

"This can be a disadvantage when compared to a branch structure that allows access to significant pools of related party funding, and could prove to be an impediment to growth if funding cannot be obtained from alternative sources," KPMG said.

The Reserve Bank recently issued a consultation paper saying it's considering allowing banks with a small NZ presence to register here both as a branch and as a subsidiary of their parent. This comes after a number of foreign-owned banks with small local operations sought to open branches alongside their existing subsidiaries in recent years, the Reserve Bank said.

"These banks have suggested that a standalone subsidiary structure prevents them from growing their local lending activities as planned, due to high operating costs arising from local capital and other regulatory requirements. Permitting banks to operate branches alongside their existing subsidiaries could potentially open up more diversified funding channels in New Zealand and encourage greater competition for the incumbent banks. There is ample evidence of the beneficial effects of openness and competitiveness in the financial system; banks, for example, compete actively to offer customers new products and new ways of obtaining service," the Reserve Bank said.

Currently four of 16 foreign-owned banks are dual registered with both subsidiary and branch structures being ANZ, ASB's parent Commonwealth Bank of Australia, Rabobank and Westpac. The Reserve Bank describes their branches as "limited scope branches", which aren't addressed in its consultation paper.

'Fraudulent Chinese income documents'

The big NZ banks' moves against foreigners using offshore income in mortgage applications came after their Australian parents halted lending to non-Australian residents and temporary visa holders earlier this year. Subsequent to that The Australian Financial Review reported that both ANZ and Westpac had discovered they had approved "hundreds" of home loans in Australia backed by fraudulent Chinese income documents, allegedly put together with the assistance of mortgage brokers.

In NZ interest.co.nz has reported on suggestions of mortgage fraud here too along the lines of that reported by the AFR.

Meanwhile, the Reserve Bank is being cagey on whether it encouraged the big banks to tighten the screws on offshore property buyers. A spokesman said the central bank and prudential regulator of banks doesn't discuss day-to-day regulatory and supervision interaction with banks. But, he added that the Reserve Bank hasn't changed any rules, nor added any new ones, in regards to lending criteria for borrowers with overseas income in its Banking Supervision Handbook.

*This article first appeared in our email for paying subscribers early in Thursday morning. See here for more details and how to subscribe.

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37 Comments

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21
up

These are the people that need firmly booting out of the NZ housing market, I'd probably even go so far as to say, no new builds either, most especially not to rent out. Foreign landlords receiving welfare from the govt (top ups etc) should be a total anathema to every single one of us.

21
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We all know that majority property are bought by asian ( using asian to not sound bad but everyon knows it is from one country) represented and helped by our govt.

The politicians are so influenced and charmed by their money that do not understand are gibing away nz on a platter to them.

Bad very bad but cant do much as it is us who voted national and more then them it is us who are to be blamed for voting rich overseas centric government.

12
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It is a shame but no choice then to wait till next year election. Fear is that damage is been already done but may take it to the point of no return if they continue as it is.

It is a matter of time before the govt faces the bitter people as still in denial and not able feel the pulse of the nation.

Did the RB just told the Govt to do something themselves?
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=1167...

15
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Hi motagebelt, when RB says immigration they too know like all of us that this crazy house rise is being fuelled by non residents (immigrants and a percentage of this may be kiwi returning but one of the major contributor to ever rising house price in multiple is by overseas fund).

Till now all people were yelling but now even RB is saying, in a suttle way now and very soon most agency will say directly as is the truth and govt can denyand delay but for HOW LONG.

10
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Yes Evita RBNZ too know, we know and also each and every expert on interest.co.nz but what can one do as everyone has to be in good books of government despit knowing the reality.

Everyone asking for data, proof but that is in government hand and government will try to hide and if not possible will try to delay as much as possible before starting the blame game - blame everyone but themself.

Mark my word if the data is released without hanky panky, will be different and government will then play blame card.

the banks have funded this mess -it is one for them and the rbnz to sort out!

Yes the Reserve Bank said hey we are not doing anything this side of Christmas but advised the government to deal with the immigration crisis - it's not a supply crisis

20
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So the Chinese ICBC bank and the China construction bank now have a conmbined NZ loan book of $227,000,000. The level of Chinese involvement in the NZ economy is quite scary. TIme to turn the immigration tap of before we become a Vancouver

13
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Absoulutely. But everyone is too scared to propose that for fear of being labelled racist by anyone under the age of 35 years old. Its ridiculous.

Pocket fluff - $227,000,000 buys less than 200 Auckland $1+ million Auckland houses

What it does do is enable continued house price inflation at the margins

Too late ...... we already are!

I think we're in the same league as Vancouver in terms of our out of control house prices that are clearly being pushed up out of the stratosphere by Chinese buyers (Sorry but it's getting more and more painfully obvious). And increasingly prices far beyond the reach of NZ Citizens and the heath of our economy.

Look at the similarities: http://www.visualcapitalist.com/vancouver-real-estate-mania/

I have been visiting Vancouver off and on for the last 30 years. In 1987 there were very few high rise apartments on the water front. It was mainly upmarket hotels. In 2000 I remember remarking on the amount of just Asian street names in the high end suburbs. In 2009 I recall being astonished at the amount of awful flashy shiny looking high rise apartments in downtown Vancouver, all cheek by jowl and reminding me of Hong Kong. Will be passing through again in September, I wonder what awaits this time. Such a shame as Vancouver is a beautiful place.

20
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NZ Top Banks have stopped mortgage leading to foreigners a couple of weeks ago.

The come back.....

CHINESE BANK WILL PROVIDE $84M LOANS TO FOREIGN INVESTORS IN NZ

The New Zealand arm of one of China’s biggest banks has been given a sizeable capital injection to take advantage of the overseas lending market after the Aussie-owned banks ceased mortgage lending to foreigners.
Industrial and Commercial Bank of China (ICBC), the world’s biggest lender by assets, has injected an extra $US60 million ($NZ84 million) into its New Zealand business to expand its lending portfolio.
ICBC (NZ) senior analyst Min Bai says the cash injection from China’s head office shows how important the bank perceives the New Zealand market to be.

.... No longer need guns, bombs and planes - economic takeover - FACT!

they're already heavily involved in the commercial space too Bigblue. The banks here going to end up with the riskier assets the way things are heading

Even the basic facts of your first example identify some established red flag indicators that trigger anti-money laundering obligations that the lawyers and real estate agents will presumably have considered.

16
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If you check the boards of The Chinese banks that have set up here you can see many a past leader or top national party person. That alone should send up red flags, why would the head hunt these people is it to smooth the way with those in power? To lobby for more favourable conditions?
We say we have low level corruption in NZ but gee that line is very murky

You are correct sharetrader many national party person and may be that is one reason that the national party is not taking any action to be in good books of them and to get a good rewards afterwards

Checkout the major shareholders on a few NZX companies.

Is it me, or does the Prime Minister look a little like the late Sir Robert Muldoon ?

Will we see a re-emergence of solicitors second mortgages and vendor finance?

"First Mortgage Trust" as described above. Who are the people paying them mortgage rates of 6.70% when most common taters here talk about 4%. Probably those borrowers don't pass any sniff test. Or worse.

Chinese buyers remain active

Tell me what is new. New Zealanders knows except National Party bosses.

Even if you show them the data, will not believe. Data is in the market, only has to be collected but why will they collect as need something to hide behind for not taking action.

Winston Peter my vote to you provided you do not go with national after the election.

Chinese buyers remain active

Exactly nothing is new. Question is when will national party accept as heart to heart they too knows and have to come out of denial as that is what is also leading to lies from them which is inevitable if you try to protect and cover up the universal truth in public domain.

That too they are able to hide and lie as in power as truth cannot be supressed for long.

Different issue but see what happened with Iraq war, denial at that time but the truth is out though was evident at that time also.

Though different issue but my point is when in power they can supress the truth for sometime but eventually will come out and in national case it is not too far

12
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Where I rent in Remuera the house on either side and behind are owned by Chinese. The house I rent has just been sold to Chinese - none of them speak English. They've given this Kiwi boy his marching orders :( one can't help feeling New Zealanders are being brought out of our own country - Auckland well soon if not all ready be owned by a majority of Asians.

If you need to rent in Auckland, then I'm afraid to say you will now need to be quite strategic and less picky where you live. The reality is, houses in certain suburbs popular with Chinese and Korean immigrants will continue to be snapped up.

If you need to be a long term tenant, then you will need to build a relationship with property managers so they will find you a property owned by a long term investor. For example, a house recently purchased by an investor will hopefully mean a rental for at least two years.

If a trader, then you can't be sure how long before you are kicked out. A landlord only willing to offer periodic tenancy agreements is a sure sign your house will be sold out from under you.

All the best finding a new place to rent.

Cannot blame Chinese bank as China government and their bank are doing the right thing of helping Chinese and are not worried about New Zealand economy or what impact it will have as their main concern is to see the welfare and prosperity of their citizen.

Can we say the same about our Government.

Wish, we could.

In some ways its a good thing that these Chinese banks are getting in on the market because these banks will facing a huge loss when house prices plummet. At least this mortgage lending won't be on the books of the NZ banks. (sure, they have their own previous imprudence to worry about, but at least this latest bit of imprudence won't be theirs).

Write to your local MP, if they get enough emails with solutions then they will act, or at least represent your concerns. Do we not care for the economic future of our young families anymore? A huge tsunami of rmb is comming, hasnt even started yet.

What? Caring for the economic future of our young families? Sounds a bit exclusive and extreme Right Wing, Can't have that....apparently.

I would hate to be renting in Auckland, you can see the way its going, its going to reach a tipping point where a few people who own all the property just keep cranking up the rent to the maximum you can afford. If you cannot afford it they will find someone who can and you will be forced to move out of Auckland. Really a shocking situation to have in New Zealand for born and breed Kiwi's.

Rent already is always cranked up to the max one can afford, time for something drastic, like ditching top ups and capping rent at 1/3 of household incomes, then if landlords can't make ends meet, then maybe they would be able to apply to a top up themselves from WINZ or MSD or whatever the current incarnation is. Time for the shoe to be on the other foot for a while

What about Heartland,TSB,SBS orCo-0p bank,where do they stand on this issue.

I like how the Chinese invade a country and take over its productive industry by purchasing and then manipulating the books so the product is sold at a loss to a puppet Co in China, to avoid NZ taxes.
I'm so glad that its China taking us over as they are nice and gentle with lovely manners.
In comparison look at the countries that the USA takes over and invades. They have no manners and aren't gentle at all.
I'm so glad our Labor government said no thankyou to invading Iraq. We don't let our kids hang out with the school bully, so why does our current elected government want to hang out with the global bully.

The Chinese don't give a monkeys about this country, it's all about the money with them, and what they can get out of it. I'm sure they look at us locals as dummies selling our real estate to them. They don't care. Sick of it!!!!