This is no April Fool’s joke: Australia's non-resident buying ban starts today.
That means from April 1, through March 31, 2027, non-residents in Australia cannot purchase existing homes for any reason. Until now, non-residents who moved to Australia for work or school could purchase already-established homes. Moving forward, all existing homes are off limits. Non-residents — those defined as non-Australian citizens and non-permanent residents — will have to buy new homes if they're hoping to invest in Australia's property markets.
Meanwhile, non-bank lenders, such as Bluestone Home Loans, Brighten, Finstreet and MA Money, among others, have all said their non-resident lending businesses have been growing in recent years, as traditional banks become increasingly regulated and risk-averse. Non-resident lending is just one of many speciality lending areas that non-banks have swooped in to fill the void.
"We were starting to see a lot more traction in that [non-resident lending] space," Tim Lemon, national sales manager at MA Money, told Australian Broker. "Especially after we adopted policies to enable these customers [from] overseas who haven't got any ties to Australia, to buy."
Chris Meaker, director, head of sales and distribution at non-bank lender Brighten, added that non-resident lending and the number of international borrowers have been growing at the firm since 2017.
"Because borrowing and serviceability is really tight with the banks. So borrowers can go to a non-bank, like Brighten, and they're able to borrow more money from us," Meaker said.
Bluestone chief commercial officer Tony MacRae added that some traditional banks have previously lent to non-residents, "but they'll make them jump through a lot of hoops to get [the loan]."
At the same time, non-banks like Bluestone, "basically apply the same processes that we do for a resident here in Australia," MacRae said — albeit for a higher fee.
But moving forward, these non-banks will be restricted to lending to non-residents who want to buy new homes or developments.
The Australian government announced the two-year ban on foreign purchases of established dwelling in February, in an effort to offer more affordable housing options to Australians and permanent residents.
"It's a minor change, but a meaningful one because we know that every effort helps in addressing the housing challenges we've inherited," Clare O'Neil, Australia's minister for housing and minister for homelessness, wrote in a Feb. 16 press statement. "The ban will mean Australians will be able to buy homes that would have otherwise been bought by foreign investors."
While the new laws are meant to have an impact on the property markets, particularly the distribution of housing supply, they will also no doubt have implications for the nation's loan markets.
While market players were quick to point out that regulations often change — especially in light of the upcoming May 3 federal elections — many participants added that the new non-resident regulations likely won't make much of a difference to Australia's loan markets. Mostly because the market is so small to start with.
According to the Australian Taxation Office (ATO), non-resident buyers made up roughly 1% of all property purchases between July 2022 and June 2023. And of those, only about a third were of existing homes.
"I don't think the new rules will have any impact [on the non-resident lending market]," said Darren Liu, founder and managing director at non-bank lender Finstreet. "There are already many, many rules coming from different states, saying that foreigners couldn't buy an existing house. They can only buy new properties. That law has been in place for [roughly] 10 years already. So there wouldn't be any likely changes to the market."
Liu added that among Australia's financial community, only a small group of lenders are targeting the non-resident market anyway. At Finstreet, many of the non-resident borrowers — which represents about 15% of the total business — are existing customers who bought property years ago, and are looking to upgrade or refinance, or non-residents who are looking to buy new properties.
In the last month alone, Finstreet received approximately 70 non-resident loan applications, up from the normal 20 to 30 non-resident loan applications the firm normally gets each month. The founder credits the increased interest to new housing developments in Queensland and Adelaide.
"It's because we've got projects happening," Liu said. "Whenever we get new projects settling — probably 30% to 40% of them — foreigners are buying, not the local market. So those are the customers we're actually targeting.
"The expat, non-resident lending market, is not really something that we see as a growth opportunity. It's more of a low-hanging fruit. But it is just good to have," he said. "There are customers on the market, but not a lot of lenders there. So it's an opportunity for the non-bank lenders to grab. We have this product and we have the expertise. So we're just kind of doing it. But it's not comparable to what we do for full-doc loan prime customers, and low-doc customers here in Australia."
At MA Money, non-resident borrowers make up less than 5% of total business, according to Lemon. "So it won't make a huge dent," he said. "But it's going to make it much harder for people who don't have any ties to the country to buy. I think we'll start to see that business slow a little bit."
Drew Bowie, managing director and head of real estate credit at asset management parent company MA Financial, added that "anything that restricts some investor purchases can be restrictive. But we've been taxing foreign [investor] purchases heavily for a long time. And we've seen — since [the government] started taxing foreign purchases — a drop off of demand. So the market really isn't dependent on the [non-resident lending] sector.
"And there's such demand locally," Bowie said. "If you think about our housing-supply crisis, it's so chronic that it actually doesn't need immigration to drive the demand for housing supply. I think if we had no offshore purchasers, it wouldn't even scratch the surface in terms of satisfying demand."
