Amid greater uncertainty in China and a tightening of domestic lending practices, the property sector in Australia is being affected by a renewed squeeze in credit, media reports suggest.

In its Property Week publication, the Property Council of Australia says the property sector is being impacted by a pull-back in the availability of funding as inbound investment from China slows amid volatility in that country’s financial markets and local banks tighten lending criteria for mortgage related finance.

“We’ve been warning our clients for some time now that they will find it harder to access finance,” Property Week quotes Development Finance Partners director Matthew Royal as saying.

Royal’s comments come as the Shanghai Composite Index has lost around a fifth of its value over recent months, albeit with the index remaining 75 per cent above levels seen as recently as early 2014.

He says the volatility has led to unexpected changes in the financial situations of Chinese investors and the postponement of purchases or forfeiture of deposits in Australia’s residential market.

Meanwhile, action on the part of the Australian Prudential Regulatory Authority is creating pressure for local banks to tighten practices with regard to residential lending amid fears of a property bubble in Sydney and Melbourne.

On July 20, for instance, the regulator announced it would increase the amount capital banks were required to hold with regard to their residential mortgage exposures, while Westpac last week announced its intention to require a minimum deposit of 20 per cent on new loans for property investment.

Royal says banks are also no longer counting the full amount of income from uncertain sources such as rents, dividends, bonuses and negative gearing when determining how much to lend for property investment purposes, and urges developers to look at reducing the concentration of debt or cash with any one financial institution and restructuring their debts across multiple debt providers.

Thus far, however, the crunch Royal refers to has yet to impact finance provided to the majority of developers.

In the most recent version of its Property Industry Confidence Survey involving surveys of several thousand people from across the property sector, a small majority of respondents said they expected debt finance availability to improve rather than deteriorate over the next 12 months.