Anti money laundering laws pose another threat to house prices

Australia's housing market is experiencing a potential "perfect storm" of factors leading to a significant price correction in recent history. One newly discovered factor, according to AUSTRAC, is the implementation of stricter anti-money laundering (AML) rules, known as "Tranche 2", which took effect on July 1, 2026. These rules have expanded AML regulations to encompass real estate agents, conveyancers, and accountants.

A major investigation, "Operation Claw," has identified widespread mortgage fraud involving brokers, lawyers, accountants, and shell companies laundering money through fake documents, primarily from China and the Asia-Pacific region. Around $4 billion in suspect loans have been found, leading to hundreds of cases referred to law enforcement.

AUSTRAC CEO Brendan Thomas highlighted the use of fake payslips, invoices, shell companies, and falsified wealth sources to obtain home loans, with many borrowers allegedly ineligible and under-declaring their income. Banks are terminating relationships with fraudulent brokers and customers, and AUSTRAC expects criminal charges to follow.

Thomas expects more loan fraud activity to emerge as AUSTRAC writes to 143 mortgage-market participants, urging stronger controls and warning that trusted referral networks have become a major vulnerability. The AML rule changes are expected to further dampen investor demand in the housing market, adding to the downward pressure on home prices.