Concerns of oversupply and a slowing property market have led one of the country’s leading banks to list 120 suburbs across Australia that will be subject to special lending conditions.
Despite a weakening in demand, more than 210,000 units are expected to be built within the next two years in Melbourne and Sydney alone, according to CoreLogic RP Data figures.
While developers continue to argue that the property boom for newly built apartments will not cause a substantial oversupply, Macquarie bank disagrees, drawing up a list of risky locations for apartment gluts.
In a confidential memo sent to brokers last week Macquarie Bank said it would demand a 30 per cent deposit on units in these high-risk areas from May 23, the Australian Financial Review reported.
The list includes 20 Sydney postcodes, 15 in Victoria and more than 40 locations in Queensland.
High density postcode listing across Australia's three major cities
Barangaroo, Dawes Point, Haymarket, Millers Point, Parliament House, Sydney, Sydney South, The Rocks
Alexandria, Eastern Suburbs MC
University of Sydney
Concord West, Liberty Grove, Rhodes
St Kilda Road Central
World Trade Centre
South Wharf, Southbank
Chapel Street North, Domain Road Po, South Yarra
South Melbourne, South Melbourne DC
Brisbane, Brisbane Adelaide Street, Brisbane GPO, Spring Hill
Brisbane, Central Plaza, Riverside Centre, Waterfront Place
City East, Wintergarden
Australia Fair, Chirn Park, Labrador, Southport, Southport BC, Southport Park
Benowa, Bundall, Bundall BC, Bundall DC, Chevron Island, Gold Coast MC, Isle of Capro. Main Beach, Surfers Paradise,
Broadbeach, Broadbeach Waters, Mermaid Beach, Mermaid Waters, Nobby Beach, Pacific Fair, Q Supercentre
Aeroglen, Barron Gorge, Brinsmead, Bungalow, Cairns, Cairns Central, Cairns City, Cairns DC, Cairns MC, Cairns North, Cairns Orchid Plaza, Earlsville, Earlsville BC, Edge Hill, Freshwater
In Melbourne, the areas listed by the bank as high density include Southbank, Docklands, South Yarra and the World Trade Centre district.
In Sydney, the CBA and surrounds, Ultimo, Barangaroo, Haymarket, Dawes Point, Millers Point and The Rocks are all classified as 'risky', as are Rhodes and Parramatta over in the west.
Meanwhile, Surfers Paradise, Cairns Central and Brisbane are all listed as high-risk areas in Queensland.
“There is the concern that there is a little too much development going on there and people should be wary,” Corelogic RP Data analyst Cameron Kusher said.
Kusher also said that the bank is trying to get ahead of the game by curbing the risk of devaluation as a result of oversupply.
“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,” he said, according to the Australian.
“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.”
But Domain Group’s senior economist Andrew Wilson argued that by raising the percentage of deposit buyers need upfront Macquarie may only exacerbate risk in those suburbs by denying them finance.
While one lender has taken the cautious approach, another major bank has taken advantage of this surge in apartments and has opened the door to investors.
Westpac Bank has announced it will reduce deposits required for investor loans to 10% from 20%.
The Reserve Bank also plays down talk of a glut.
“If supply and demand are equilibrating without massive changes in prices, that sounds like a market working,” RBA governor Glenn Stevens said.