Big banks are set to announce tougher measures to crack down on high rise apartment purchases including blacklisting more than 100 Brisbane suburbs, doubling the minimum apartment size to qualify for funding, evidence of rental cash flows and tough new valuation criteria.
Lenders such as Adelaide Bank are introducing “minimum funding requirements” requiring apartments to have their own bathrooms, kitchens, laundries and windows in key rooms, such as bedrooms and lounge rooms.
Others, such as Suncorp Bank, the nation’s fifth largest mortgage lender, are circulating a list of 39 Brisbane postcodes covering more than 100 city and metropolitan suburbs where the new lending restrictions will apply from next Monday.
“Our settings have been adjusted for postcodes based on recent weakness in the investment unit market in Brisbane, with evidence of a reduction in prices,” a Suncorp Bank spokesman said.
“Whilst there has been some unit development in our main suburbs it has been nothing compared to our neighbours.” said Hicks.
Nervous lenders are turning the screws on apartment buyers amid growing concerns about over-supply, falling prices, restrictions on foreign buyers and potential risk from combustible cladding widely used on high rise apartment exteriors.
For example, new apartment sales in the Queensland capital have reportedly collapsed by more than 70 per cent in a year, prompting desperate developers to offer lucrative incentives to attract buyers.
Developers, such as Consolidate Properties, claim Brisbane has been cruelled by restrictions on financing set up to ease speculative buying in Melbourne and Sydney.
Other developers, such as ForceOne Development, have been using incentives like a free Toyota Yaris to encourage apartment sales.
AdelaideBank, a division of Bendigo and Adelaide Bank, will today (Wed) announce stricter controls on apartment lending that include bigger sizes, better design, identifiable cash flows for investor/lands and more stringent calculations of a borrowers’ capacity to repay.
“Now presents a great opportunity for cashed up investors to get into the growing Brisbane market and take advantage of bargains that exist. We know that the population in Brisbane will continue to increase and that will mean there will always be strong demand for homes in the inner suburbs,” said Madeleine Hicks
In fact Ms Hicks called for “greater investment in infrastructure in the Stafford, McDowall and Everton Park suburbs to better reflect the increase in population that is moving into these suburbs. This only seems fair as the Council is collecting greater revenues but not spending the money here.”
The Minimum requirements for high density apartments to obtain funding include windows in bedrooms and living rooms, separate bathrooms and their own laundries and kitchens. High density apartments are complexes of more than 50 units or five storeys.
Minimum sizes for two bedroom apartments have been doubled to 60 square metres and timeframes for off-the-plan valuations have been reduced from six to three months to “better the risk” and “align acceptance of applications and valuers’ professional indemnity cover”.
Last month Australia and New Zealand Bank also issued a blacklist imposing tougher terms requiring borrowers to have a 20 per cent deposit.
The value of apartments has fallen by about 1 per cent in Brisbane during the past 12 months, according to SQM Research, which monitors property prices.
Several recent reports by independent consultants have warned demand will be exceeded by the estimated supply of new apartments in Brisbane, which will add to downward pressure on prices.
There is also growing investor concern about the outcome of current investigations into the widespread use of inflammable cladding on apartments, particularly who will be liable for its replacement.
Under Suncorp’s new rules, it will no longer accept investment loan applications for apartments that do not have a minimum deposit of at least 20 per cent.