As banks continue tightening lending to foreign buyers, Australian-domiciled Chinese banks are making up some of the shortfall.

Citigroup is the latest major bank to tighten lending to foreign buyers amid concerns about home loan fraud and money laundering. 

The banking giant has restricted the income that can be used in mortgage applications to only a dozen currencies.

While the Chinese yuan, the Thai baht, and the Malaysian ringgit have been blacklisted, income earned in US, Singaporean, Hong Kong and New Zealand dollars, Danish and Swedish kroners, the euro, the South Korean won, the Swiss franc, and the British pound will still be accepted in loan applications.

Citigroup's move follows similar steps taken by Westpac, ANZ and CBA earlier this year.

As local banks turn away from foreign buyers, Chinese banks with operations in Australia have told The Australian Financial Review they are seeing an up-tick in demand. ICBC, Bank of China, and China Construction Bank have retail branches in Sydney and Melbourne.

While the banks are accepting and approving applications from foreign buyers, they are adopting a cautious approach in line with local banks, including lowering their loan value ratios and adopting stringent documentation rules.