Off-the-plan apartment buyers could find it harder to borrow funds, as banks introduce new conditions for property valuations required to secure a loan.
Major lender
Westpac has introduced new rules that require mandatory apartment inspections by a qualified valuer before a final loan offer is made, the
Australian Financial Review has reported.
The inspection will be done when the valuers can go on to the building site and walk through the building, which because of occupational health and safety rules is typically a few weeks before completion, the report added. In the past, many lenders approved loans based on the building's plans or desk-top valuations.
Before the valuation on a project’s completion, off-the-plan buyers would need conditional approval at the outset “based on criteria such as position, fixtures and size,” the report said.
The valuation can also be influenced by different rules between state and territories.
Tony Kelly, managing director of Herron Todd White, told the
Australian Financial Review that tougher inspections will guarantee quality and boost industry standards. However, the report said that “problems could arise for borrowers if the completed apartment's value is less than the original price, either because of market movements or inferior construction.”
A
CoreLogic study released in 2016 said "The volume of new apartments is now approaching, and even exceeding, the average number of apartment sales overall in the past five years."
Some banks have already begun tightening lending on particular products, particularly interest-only and investor refinance.
Bankwest recently confirmed that it had removed negative gearing tax benefits for borrowers. “For customers who operate their investment property at a loss, where the income of the investment property does not exceed the costs, the related tax benefit will no longer be included in
Bankwest's calculation for serviceability of the loan,” a spokesperson told
Australian Broker.
AMP also announced it will no longer accept loan applications to refinance stand-alone investment property loans with investment property security.
“We will no longer accept loan applications to refinance stand- alone investment property loans with investment property security. Refinances that include owner- occupied and investment properties remain acceptable, subject to security property values,” the bank said.
But the
Australian Financial Review said some lenders are offering discounts, cash incentives, and special terms, usually through their mortgage broker network. This includes
ANZ, which is offering up to $1,200 for new home or residential loans refinanced under its Breakfree package through to the end of April.
Westpac and subsidiaries are offering a $1250 refinance rebate for customers applying for a new owner-occupier or investment home loan package, the report added.
Credit watcher Fitch revised last month its outlook on the banking sector from stable to negative. It was concerned that rising household debt and increased house price growth could result in the banking system becoming more sensitive to sharp corrections in the labour market or if interest rates change.
Related stories:
Non-major tightens investment lending, interest only loans
Non-major eliminates negative gearing tax benefits
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