How mortgage brokers are helping migrants chase the Australian Dream

by Mike Wood27 Sep 2021

Australia’s net migration rate has historically been one of the highest in the developed world, with the population growing by almost 1% per year in the decade before the pandemic struck.

The idea of home ownership, the Australian Dream of the Hills Hoist on the quarter acre block, is central to integration and becoming an Aussie, and the goal of the millions of new migrants that have come to Australia in recent years.

For brokers, being able to interact with this community is vital and understanding the unique situations that many have – both in terms of where they have come from and what they do in Australia – is crucial to make the most of opportunities.

With that in mind, Australian Broker spoke to two experts who deal predominantly with migrants, and with their unique circumstances.

Wally Ayad is managing director at Mortgage Providers, a brokerage based in Bankstown, and with Ijarah Finance, an Islamic finance company that provides halal-compliant loans to Muslims. Chris Zhang is a finance specialist and mortgage broker at MoneyQuest in Burwood, VIC.

“Most of our clients are from non-English speaking backgrounds (NESB), a mix of Indian subcontinent, Middle East and Southeast Asia. There’s quite a fair bit who are the children of migrants as well,” said Ayad.

How brokers can make the Australian Dream a reality

“What you’ll find with people is that there is a tendency to help one another, especially parents and siblings, there’s plenty of gifts and offers of family guarantee to help them get into the property market. There’s an encouragement from family and family units to help fellow family members to buy a property.”

“There is a massive rush into the property market at the moment, not just in Sydney or Melbourne, but nationally.”

“We run a secondary business, not Islamic finance, called Mortgage Providers, and that’s been trading for 18 years. The level of enquiries from Islamic finance coming from a non-English speaking background is significantly higher than our Mortgage Providers enquiries.”

“There’s a big move from these communities to go in and solidify themselves in the property market. Even with multiple properties: I’ve got some who are up to their 10th property and more.”

The importance of property in Chinese communities can’t be overstated, said Chris Zhang.

“Chinese people think that property is one of the biggest investments of their whole life,” he explained. “It’s like that in Australia, but Chinese people treat property as the most valuable thing in their life, pretty much, apart from their family and children.”

“Home and family are pretty much equal. If you don’t have a secure place to stay that belongs to them, they probably won’t have a happy family. The last thing they want to default is a mortgage. They don’t want to lose it, because it’s so important.”

Helping Chinese property investors to understand the Australian market

“When they come to buy property here, they’re happy to sell a property in China to come here and buy a place in Australia. They’ll spend their life savings in China to find a property that they want to stay in to make their family happy.”

There are, of course, specific challenges in finding loans for clients from migrant backgrounds. For Wally Ayad’s customers, it is often convincing them that Australia’s financial institutions ae solid across the board.

“With our non-Islamic finance Mortgage Providers brand, you find a lot of people with NESB who are born overseas, and they prefer the big brands,” he said.

“They trust CBA, they trust Westpac. Because they’ve been around for a long time and they have a good brand name. Even if they have a gut feeling that maybe they don’t have a proper understanding of everything, they understand that the financial institution will work in their best interest. The Big Four won’t rip them off.”

“When you encourage them to use a lender they haven’t heard of, a smaller bank or a credit union, they get shy. They say ‘Where I come from, we don’t trust people like that, they’re not big enough’. In Australia, they’ll trust the big institutions.”

“Sometimes it comes from the background that the parts of the world that they came from, the financial order might not be as well structured as Australia.”

Self-employed migrants struggle to achieve the Australian Dream

For Chinese clients, buying a home is a huge move for the family and other aspects of like factor into it.

“Back in China, it’s very important to consider the school catchment,” said Chris Zhang. “In Beijing and Shanghai, the properties close to good schools are so expensive. It’s five to ten more times more expensive than Australia.”

“If a wealthy family migrates from China to here, they want to buy property and will invest a higher amount than local people because they think it’s cheap.”

“They’re investing money into their children, into a school zone like Glen Waverley or Doncaster in Victoria. That’s why there’s a Chinese community in that area. Compared to what they pay in China, it’s cheap.”

Ayad deals both in traditional finance and Islamic finance, which circumvents a prohibition in Islam around interest. His clients are also faced by challenges around understanding the system and the nature of work that they tend to be in.

“With Islamic finance, many of them understand what interest is, and they understand how finance works generally, but they’re not very proficient in the technical terms.,” Ayad said.

“Both in conventional and Islamic: you find that even Muslims don’t understand Islamic finance correctly. There’s overall lack of education in what financial instruments are, how they’re used and how they’re applicable.”

“With migrant communities, there’s many in the SME sector. Proof of savings can be challenging, and there’s traditional means of saving where they save at home or within the family. There’s a lot of gifts being given from parents to children: they’ll gift them $100,000, but chances are they originally saved that money with their parents. Their parents took that money off them as savings.

“There’s internal family cooperatives, which might be circles of hundreds of thousands of dollars that the family contributed too, and they share it among relatives.”

Islamic finance, migrants and the Australian property market

“They say: ‘You need that $200,000 so we’ll give it to you’, and that money is rebuilt over months and then they give it to the next relative. You see these family communities are very common in the Southeast Asian, Indonesian and Malaysian communities. I’ve seen that a lot.”

Chinese clients tend to have the same issues with self-employed people, and also the different culture of borrowing and security in China.

“As a broker, I find that often Chinese clients are wealthy enough to buy property outright,” said Zhang. “In Chinese culture, the old story was that if you had something unencumbered, you could give it as a credit roll and they would give you the money.”

“Over here, income is more important for a home loan and some people don’t understand it. They think that because they have a property worth $5m, they can borrow $1m from the bank. That’s a cultural difference that they face, especially new migrants.”

“I have to educate them and tell them how it works in Australia. They have to have a stable income to service a home loan to get the money.”

“Obviously, then you’re talking about paying a home loan, there’s a lot of self-employed people. I predominantly deal with self-employed people, so I have to tell them how to pay tax properly to be able to borrow more money to buy more properties.”

Read more: CBA is changing lending criteria for self-employed people