Doubling in number of Asian banks as spurned foreign investors look further for finance
Doubling in number of Asian banks as foreign investors look further for finance
The number of Asian banks operating in Australia has doubled since 2009, offering new options for foreign investors.
Four new Asian banks entered Australia in 2016-17 alone, according to corporate law firm MinterEllison with the total number of foreign banks now at 23.
These banks could help foreigners navigate foreign investment review board requirements, explained deals chair and foreign investment specialist Victoria Allen:
"The increasing numbers of foreign banking institutions setting up business in Australia is an encouraging trend, particularly in light of the difficulty and uncertainty for foreign investors attempting to navigate FIRB's new regulations."
Dipping their toes
Foreign banks could be one of the main beneficiaries of the recent bank levy, Australia’s big four have argued in recent weeks, on the basis they can draw on funding from overseas without being affected by the levy.
The amount lent by foreign banks is at present relatively small: just $3bn in loans to owner-occupiers and $1bn in investors in March, according to APRA’s latest ADI exposures data. ING DIRECT are the best known, with Bank of China also on some broker panels.
HSBC recently announced their return to the broker channel but, like Citibank, will only lend to customers with whom they have a prior relationship, such as previous loans or extensive savings.
However, according to MinterEllison specialist finance partner John Elias, this could be about to change.
“New bank entrants have traditionally entered the Australian market by dipping their toe through participation in syndicated deals, and lending to those they have a relationship within their home jurisdiction," said Mr Elias.
"It's significant that many foreign banks are now well beyond merely establishing a footprint in Australia. Their engagement in the Australian market has matured considerably, so much so that they're lending on a bilateral basis and leading syndicates."
Not going away
Despite the limited bank lending options available to them, foreign investors remain a presence in Australia.
The Budget included a new tax on foreign investors who leave properties empty, although Chinese international property portal Juwai.com claims few will be affected. According to Sue Jong, chief of operations
“About 31% of Chinese buyers are investors not planning to occupy the property they buy. That’s the group potentially most affected by the vacancy tax.
“Even within this group, most are unaffected because they can’t afford to leave their property empty in the first place. They need the rental income for their investment to succeed. That’s one reason rental guarantees are so popular with Chinese investment-oriented buyers.
Those who do leave properties empty tend to be very wealthy and able to pay the tax, Jong added. She predicted currency conversion restrictions in China were more likely to affect demand:
“Juwai.com believes that in 2017 Chinese property investment is likely to be lower than in 2016 but will still be close to its recent record levels.”
