This article was first published on www.theaustralian.com.au | 12:00AM MAY 24, 2016 by Kylar Loussikian and Ben Wilmot
Macquarie Bank has listed almost 50 risky postcodes for apartment buyers, restraining its lending in more than 100 suburbs across the country’s capital cities.
The inner-city postcodes across Sydney, Melbourne and Brisbane, as well as on the Gold Coast and in Adelaide, Perth and Darwin, are most at risk from an oversupply of units in a slowing market. Macquarie yesterday advised mortgage brokers of new requirements, with buyers having to provide at least 30 per cent of the purchase price upfront.
The move follows restrictions imposed by banks on real estate investors and foreign buyers.
Macquarie’s list will be read as a guide for property investors about possible risks of buying in suburbs that could face a glut as those two groups, which have underpinned strong rises in property values, pull back from the market.
Despite a forecast weakening in demand, more than 231,000 units are expected to be built within the next two years, according to CoreLogic RP Data figures. Analyst Cameron Kusher said Macquarie’s restrictions applied to areas where there were “huge amounts of new unit supply”.
Sydney is the only eastern capital where growth in apartment values has outpaced those of houses, rising 11.5 per cent compared with 8.4 per cent. “Macquarie is trying to be in front of the risk, a lot of (the new stock) is being bought by investors and as banks change policies about lending to investors, some will have trouble settling,” Mr Kusher said. “With so much stock coming onto the market, the properties won’t increase in value between being bought and being completed, so the person who settles on it is underwater from the start.”
Nick Chau and Gillian Liu have owned a one-bedroom apartment in Alexandria, bordering Zetland, since 2010, and have concerns that more apartments will push prices lower.
“If we buy somewhere in this area we are going to want it to be at a higher value than what we bought it for, but at the same time … with value going down, it’s in our favour, because we are looking to upgrade,” Mr Chau said. “It’s concerning yes, but I wouldn’t be super-overly worried.”
Home loan king John Symond warned last September Sydney was in danger of a crash in apartment prices of up to 20 per cent over the next three years.
“If half of these apartments within a 5km range (of the CBD) hit the market, there’ll be a huge glut,’’ he said. “I’d say be very, very cautious in buying apartments off the plan because you can’t control the future.’’
Chief executive of Metro Property, Luke Hartman, said demand for its developments, mostly around Brisbane, remained strong and rental vacancies low. Lending restraints now being imposed by banks on smaller and less experienced investors would soon limit new apartments coming onto the market.
“Unless the project is currently under construction, many of the earmarked project in Brisbane’s inner-city will not go ahead,” Mr Hartman said.
Macquarie’s loan-to-value restrictions are the toughest so far. National Australia Bank late last year imposed a suburb-based risk assessment, focused on high-density postcodes, though in many cases still requiring only a 20 per cent down-payment.
Macquarie, which declined to comment, will require borrowers with five or more properties in a concentrated area to meet other requirements, provided to mortgage brokers. A clampdown on loans to property investors and overseas buyers could put downward pressure on demand for new apartment developments.
RISKY POSTCODES
NSW: 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2017, 2138, 2150
Victoria:3000, 3001, 3004, 3005, 3006, 3007, 3008, 3009, 3141, 3205
Queensland: 4000, 4001, 4002, 4003, 4004, 4215, 4217, 4218, 4870, 4879
WA: 6000, 6001, 6002, 6003, 6004, 6005, 6210
SA: 5000, 5001, 5002, 5003, 5004, 5005
TAS:7000
NT: 800