The Chinese investors who would buying Australian apartments on zero-deposit will be paying for it with credit card rates, that is an annual interest rate of 14 per cent as offered by privately owned Ping An Insurance. The aggressive procedures of Ping An in terms of granting loans contradict the efforts urged by Australian regulators to implement stricter loan procedures that should slowdown the property market.
Property agency Austpac promotes the scheme to clients. Shanghai-based manager Eddie Yuen of this firm says that the loan had a two-year term and was to fund the initial 10 per cent down payment for an off the plan apartment, according to Domain. He said, "You can walk into one of our seminars without a dollar in your pocket and still buy an Australian property."
The Australian Prudential Regulation Authority (ARPA) has been strongly urging local banks to lift down-payment requirements and toughen income calculations for fear that looser financing are driving more speculation in the Australian real estate.
Apparently, ARPA's influence over these local banks is feeble. Its efforts are not even enough to keep foreign banks from aggressively granting loans.
Senior economist Justin Fabo at Australia and New Zealand Banking Group (ANZ) notes that loans with zero deposit and with a high interest rate would inspire speculation. He has previously worked at the Reserve Bank of Australia. He said, "If you are taking out such a loan at that interest rate [14 per cent] you are expecting a capital gain." He added, "At least they [Ping An] understand the risk if they are charging 14 per cent."
Ping An is one of the Chinese Institutions that offer zero-deposit loans over a development in Melbourne's West Brunswick and another at Hope Island on the Gold Coast. It markets this program with slogans that say, "Become an Australian property owner with zero down payment" or "Join hands with Ping An and realize your overseas property dream."
