Liken to profiteering from a natural disaster, the Monopoly game of apartment finance has loan sharks price gouging foreign investors that are at risk of not being able to complete their apartment purchase. The finance price gouging has spiked broker fees and finance rates to levels higher than is considered reasonable or fair. The exploitative and unethical finance products being offered on social media channels in China such as, Weibo and WeChat include broker and bank fees up to 7% of the loan amount. To put this into prospective, on a 5% broker fee and a $500,000 loan the broker will pocket $25,000 just for submitting an application to a tier two financier.
But many are now facing challenges of obtaining finance as the big four banks tighten their lending restrictions at a time when most Chinese buyers want to get their loans financed through Australian banks. With the banks out of the picture, private lenders in Australia are filling the gaps. Private lenders charge interest rates of up to 13 per cent, but analysts say that is cheaper than losing a 10 per cent deposit. With a lot of supply coming online in the next few months, Mr Condon warns some will break their contracts. "We might see a few more fall-overs and people not settling," "In saying that what we're hearing in the market — 50 per cent [of the offshore sales are] a bit of a concern."
Financial advisers and financiers say thousands of investors with exposure to billions of dollars in high-rise apartments are searching for ways of deferring, reducing or off-loading payments through alternative funding or selling the apartments, typically around central business districts.
New private-equity products – with much higher charges than bank lending products – are also being launched.
The scale of the problem is unclear but anecdotal observations from financial advisers in Australia and Shanghai (where many buyers live) are that it could be big – and growing.
Many lenders that provided deposits are refusing to provide the additional funding for local buyers amid growing concerns apartment values are falling, particularly in Melbourne thanks to over-supply and falling demand.