Mr Yin said this represented nearly 100 per cent of his clients who were waiting for properties to be completed in Australia and that most of the apartments were in the Melbourne CBD.

D-day looming

Melbourne-based Marshall Condon, chief executive of mortgage broker Neue Black and who also has off-shore and local Asian investors, added: "In the next three to 12 months, many investors will be applying for funding to complete their deals, however, they will be become increasingly concerned as they discover funding is limited."

Billions of dollars has been invested in tens-of-thousands of high-rise apartments that are reshaping the skylines of the nation's major capitals, particularly Melbourne, Sydney and Brisbane.

Most have been sold off-the-plan, which means purchasers buy off the blueprint with a deposit and complete when it is built, which requires a second valuation and financing commitment by the lender.

But a huge increase in supply has slowed demand, particularly around Melbourne's CBD, pushing down prices.

Lenders, which initially fell over themselves to finance overseas' buyers, slammed on the breaks when spot checks on the loan applications detected widespread fraud.

The main problem is mainland Chinese buyers, which account for about half of the deals. That means many local lenders that agreed to provide funding when buyers made deposits, will not recommit upon completion.


Nervous local lenders fear that a sharp downturn, or change of sentiment, could result in foreclosures with overseas borrowers they have little chance of locating.

Mortgage brokers, who receive their commissions upon final completion, are nervous they will not be paid for negotiating deals and financing.

Rescue packages

Developers, some of whom have already cancelled projects, are concerned about financing existing and future projects.

It also has potentially big economic impact for local consumer sentiment, building services and government revenues.

Overseas financiers, typically based in Singapore and Malaysia, are working on rescue packages for borrowers by creating private bail-out funds, or buying apartments off stressed purchases, which means they lose their deposit.

They include rolling five-year terms, starting at 7.5 per cent, or one-year emergency loans at 12 per cent, according to financiers.

Other packages are stepped-loans where the different amounts of the loan have different rates, invariably several times higher than Australian lenders' standard variable or fixed rate loans.


For example, Australian banks and other local lenders are offering three-year fixed rates at below 4 per cent.

Home Tree Group's Mr Yin said so far he was unable to secure funding for his clients and doubted they would be able to settle.

"I have now stopped dealing in Australian property," he said.

Another agent in Shanghai, the chief executives of Iron Fish China Lanny Xu, said while most of his clients were not affected by the change, around 20 per cent were trying to on-sell apartments as they were unable to complete settlement.

He said of some were looking to banks in Singapore for financing, as they were still happy to extend loans over Australian property.

"The cost of funding in Singapore is higher than in Australia," he said.

'Starting to bite'

Mr Xu said another option was to seek finance from newly established mortgage funds, which were looking to fill the gap left by the withdrawal of Australian banks from the market.


He said such funds were charging interest rates of between 8 per cent and 12 per cent.

Scott Kirchner, the manager of Bella Resident in China, said the inability of offshore buyers to access finance was "really starting to bite".

"We are reluctant to take on new clients unless they have 100 per cent of the cash for a property," he said.

"But then there's the issue of how do they get the money out of China."

Under China's strict capital controls individuals can only transfer $US50,000 out of the country each year. At the same time, mainland banks have tightened up on the many loopholes which previously allowed individuals to get around this quota.

Mr Kirchner said while there was still strong demand for Australian property from Chinese buyers, many were waiting to see how apartment valuations were affected by the tighter lending environment.