Banking giant Westpac has stopped lending to foreign property buyers in a surprise move that is likely to spark concerns about a slowdown in residential construction, particularly in capital city apartments.

Australia's apartment construction boom is being underpinned by a wave of foreign buyers, with many borrowing from local banks to fund part of their home purchase.

Westpac said Wednesday that it, and subsidiaries St George, Bank SA and Bank of Melbourne, would immediately halt all home lending to non-residents and temporary visa holders.

The bank, one of Australia's big four and the country's second largest bank, said it was also tightening lending standards on Australian citizens and permanent visa holders whose main source of income was from overseas, reducing the maximum amount it will lend them for property to 70 per cent of the purchase price.