![Tim Gurner: Thirty-five per cent of FIRB-approved buyer are paying cash.](/content/dam/images/g/r/q/i/u/2/image.related.afrArticleLead.620x350.gu257c.png/1485988355217.jpg)
The proportion of foreign investors paying cash to settle new Melbourne apartment acquisitions has surged to more than 35 per cent from just five to 10 per cent in the past, after the major banks quit offering finance to overseas buyers last year.
BRW Young Rich Lister Tim Gurner said over 35 percent of Foreign Investment Review Board (FIRB)-approved buyers had paid cash to settle apartments in Ikebana, a recently completed Gurner development in West Melbourne.
"Previously we saw cash settlements in the realm of five to 10 percent [of FIRB buyers]," Mr Gurner said.
Nearly half of the 241 apartments in Ikebana were bought by FIRB buyers. Prices start from about $400,000 for a one-bedroom apartment up to more than $700,000 for a two-bedroom unit.
![Gurner's Ikebana development recently settled.](/content/dam/images/1/3/2/9/8/5/image.imgtype.afrArticleInline.620x0.png/1475461915800.jpg)
The cash payments helped Gurner repay a $90 million construction loan to NAB. A $40 million ANZ loan was also repaid for another project, 107 Cambridge Street in Collingwood with 91 apartments, which did not have any foreign buyers.
Nick Holuigue, a partner in law firm Maddocks's development practice, said there had been an "unusually high percentage of cash buyers" as a proportion of projects that settled in December.
Just over 1000 apartments and residential lots settled through Maddocks in December including Gurner's Ikebana development.
The rise in all-cash payments by Chinese investors - which don't require the usual inquiries made by lenders - may raise eyebrows at the government's anti-money laundering agency Austrac after a surge in suspicious property transactions last year. Austrac investigated about $1 billion worth of property investments from China in the year ended June 30.
Evan Cathcart, a director at Three Sixty Property Group, which sells apartments and townhouses off-the-plan into China (including Ikebana) said there had been a "huge surge in cash buyers in the past 12 months or so".
"In the past, 5 per cent of overseas buyers were paying cash, now that's risen to a point where with our most recent settled sales, 35 to 40 per cent of foreign buyers paid entirely with cash," Mr Cathcart told the Australian Financial Review.
As the local banks have tightened their policies to foreign buyers, Mr Cathcart said there was a very large middle class pool of buyers from China who had have the money to settle in cash.
"[Capital] restrictions have been tightening in China, but the majority of our Asia-based buyers are reasonably well heeled in Australia and are using money they have locally,"
He added that many buyers already owned property that was unencumbered or with large amounts of equity in them.
A Melbourne-based Chinese estate agent who asked not to be named said it was quite possible that Chinese buyers were paying 100 per cent cash for new apartments.
"While there are capital controls, there are tons of ways to get around it. My partners having used these channels to transfer cash across for Melbourne purchases. If these buyers have enough connections on the Chinese side, it can be done," he said.
The use of cash payment does not appear to be as prevalent in Sydney. "I haven't seen any such transactions in the Sydney market," said Tony Zhang director at real estate agents, Imperial Star Investment Group.
"From my end, I have doubts there is a large prevalence of cash buyers because the Chinese capital controls are very strict. And even if they have the ability to pay 100 per cent cash, they would not do it to protect their privacy.
"Otherwise it would be very dangerous, and will attract the attention of the Chinese government. I suspect it is a bit of sales gimmick to attract more Chinese buyers," he said.