Bank lending on units has changed and it could affect the market

By Holly Clark

THERE have been a few silent changes by a couple of the major banks that could have a big effect on the inner city unit market.

To understand these changes you will firstly need to know the variables when looking at this market.

The first thing is for units, size does matter.

Units under 50 sq m are considered a high risk asset by the banks. They usually require huge deposits and many banks won’t lend on them at all. The upside of these units is they are normally very high yielding properties, great for cashflow, but have very low capital growth. From these units you move to one and two bedroom apartments these are usually 55sq m to 90sq m and there has been a well documented wave of these settling and being built in the inner city.

The three-bedroom and beyond unit market is a smaller market and always seems to have a solid following of buyers.

The silent changes I am referring to is a change to a banks lending policy that states they will no longer lend for a style of property or in a certain area.

Banks or institutions will do this when they feel the area is volatile or that they have enough loans in that area and don’t want to expose themselves to more risk.

This week the Commonwealth Bank, one of the last major banks still lending on smaller units, made an announcement that investors will now need more deposit to purchase an inner city unit. There are whispers that this is just the first step in the banks withdrawal from the inner city market as certain postcodes are next in line for more deposit requirements for both investors and home owners alike.

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