I recently wrote that the ANZ Bank has a list of more than 50 “no-go investor postcodes” it was concerned about.
Now the Australian Financial Review report that AMP Bank also have a confidential black list of more than 140 suburbs where they are wary of lending for apartments based on growing concerns about oversupply of off-the-plan apartments and, in some areas, falling prices.
Source: Australian Financial Review
AMP borrowers will face tougher terms on the amount borrowed and a ban on using some incentives offered by developers, such as rental guarantees.
Lender ING Direct also recently banned developer inducements such as rebates, special conditions, furniture, televisions and cars to buyers to complete their off-the-plan deals.
Similarly Rock Building Society expanded its list of ‘high risk’ postcodes and limited its loan-to-value ratios for certain properties to 70%.
All this comes in the wake of recent concerns of oversupply of new and off the plan apartments and reports of properties not valuing up to contract price on completion including a recent survey by WBP Property revealing that nearly half off-the-plan sales in Melbourne in the eight months to last August were in negative equity, meaning these properties were worth less than their purchase price.
Average losses were about $40,000, or about 10% between agreement to buy and pre-settlement valuation, which is required by lenders to assess any changes in value and he amount of money a lender can borrow.
The big problem:
The problem is buyers will have to make up the difference between the purchase price and the final valuation and at the same time find a bigger deposit if the bank will now only lend 70% or 80% of its valuation (not the contract price) when many off the plan buyers were hoping to get either an 85% or 90% LVR when they initially committed to the purchase while others were hoping to make a quick profit expecting to see their properties worth much more than their contract price – not less as seems to be happening more and more.
Unfortunately some purchasers will not be able to settle on their proeprties and risk not only losing their deposit, but being sued by the developers for any losses made by the developer when they resell the property at a lower price.
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