Be careful where you buy your next property.
Even though you may like the location, your bank may not.
Did you know that all the banks have “blacklisted suburbs” – suburbs where they are not keen on lending and where borrowers face tougher hurdles to get a mortgage and have to stump up a bigger deposit.
In fact, some banks have a list of suburbs where they are not prepared to lend at all, or particular new developments in which they feel they have an overexposure and are not prepared to “risk” taking on extra loans.
In general, these unpopular suburbs are inner city and near CBD locations where there is an abundance of new high density apartment complexes.
And this comes at a time when banks are tightening scrutiny of income received and household expenditure used in their serviceability models to assess loan eligibility, making it harder for property investors to get finance.
Last year confidential list of suburbs was sent to mortgage brokers by the big four banks and more recently Citi sent a note to brokers highlighting 34 Sydney postcodes, 27 in Melbourne and 12 in Queensland where it’s loath to lend.
The good news is this list also highlights a number of suburbs where it is still keen to lend 90% LVR.
What does this mean for you?
If you’re looking for a new home or investment property around 80% of your property’s performance will be determined by its location and possibly only 20% by the specific property you buy in that location, therefore researching the correct location is critical.
This all has to do with demographics and wages growth which leads to affordability – not cheap properties, but locals who can afford to pay more for their homes.
So look for a location that is gentrifying or find an area where economic growth will create jobs and wages growth so that disposable incomes of the locals are growing strongly making housing more affordable.
And then make sure your bank is happy to lend you money to purchase in this location.
If you’ve already committed to buying a property off the plan it’s a good idea to look into your lending situation as soon as possible as the landscape may have changed since you first committed to your purchase.
Speak with your broker to ensure you haven’t bought in a suburb blacklisted by the traditional banks and possibly look for an alternative lender.
A selection of blacklisted postcodes
|Sydney Olympic Park||2127|
|St Kilda Road||3004|