01 Apr The suburbs the banks don’t like – Andrew Mirams
We find out this week about the suburbs the banks don’t like. As Andrew Mirams points out ‘it is not that they don’t like them it is just that they are hesitant to lend on property in those areas. So what is it that turns them off? Andrew tells us.
Kevin: I’ve heard a little bit of word recently about the banks turning on and turning off some suburbs around Australia. So, where are they? Should you get advance notice and be aware of these? Let’s try and find out. Andrew Mirams from Intuitive Finance joins me. He’s in constant contact with the banks, and he has his finger on the pulse of this all the time.
Good day, Andrew. How are you doing?
Andrew: I’m very well, Kevin. And you?
Kevin: Good, mate. Give me the lowdown. Are there suburbs that the banks don’t like, and do they tell you?
Andrew: They do. From a lending perspective, they give us lists and ideas of suburbs. When we say they don’t like, it’s not that they won’t lend into those areas; what they might do is have some restrictions, or they might have some different things where they want to do a lower loan-to-value ratio. So, if you bought a property for $500,000 and normally you get a loan at 80% at $400,000; it might be $350,000 at 70% or $300,000 at 60%.
Very rarely – and again, there are probably a couple of conversations here – it’s the style of property as well as the suburb that it’s in.
Kevin: You make a very good point there. It’s not that they won’t lend; it’s a matter that they have to restrict their lending in some ways and put some more conditions on it.
Do you see a change? Do suburbs come on and off that list at all?
Andrew: They do. Probably similarly with areas as well. You had the mining boom, and then there are some towns in WA, up in the Northern Territory, and Queensland that are far less desirable just because of the amount of property that was bought and prices that were paid at the peak of it and things like that.
Suburbs-wise in and around Melbourne, Sydney, or Brisbane, some of the suburbs we could mention or name are highly desirable places to live, but with that desirability, they’re probably undergoing a lot of development and there are probably lots of towers happening. So, there’s a real concentration, and that’s probably why they get picked out and get scrutinized.
Kevin: Yes. It doesn’t mean it’s always going to remain like that. If you look back over the decades, there are certain suburbs in different parts of the cap cities that would have been very unfavorable, like New Farm in Brisbane or I think Paddington in Sydney, some of those inner suburbs that would have been very undesirable.
Andrew: Yes, New Farm, Fortitude Valley, and places like that.
Kevin: Yes, but to look at them now…
Andrew: Now they’re highly desirable places to live, but at the same time, both of those that you just mentioned are actually on the list because of the amount of development happening there.
Similarly, in Sydney, Bondi is not but Bondi Junction is on it. That’s a highly desirable place to live in and around, but it’s purely the amount of development stock that’s come out.
And in and around Melbourne, you have got some amazing areas – North Melbourne, Carlton, Richmond, and places like that, which have really gentrified. Hawthorn which is a really high net worth or affluent suburb in Melbourne. That’s actually on the list purely because of the amount of development that’s happening in and around there.
They’re not saying no; they’re just saying “Look, there might be another covenant or two that we put to a purchase in that suburb.”
Kevin: Okay. You’ve obviously got a list because you were reading off a list, or maybe you’ve just got it in the back of your brain there; I don’t know.
Andrew: I’m not that good, Kevin.
Kevin: Is this list generally available, or do they closely guard who they give it to?
Andrew: All the internal lending branches will have it, but again as a broker, we’re fortunate that we need the policies of every lender that we deal with so we can get access to each of them. We can make contact with lenders.
And this is why we’ve spoken a lot about getting preapprovals or just checking with a property you buy. The old thing, caveat emptor, let the buyer beware. You don’t want to commit to a property without knowing this type of thing, and that’s where having a really good broker or financial strategist on your side who can work through and make sure you have your client’s needs protected is pretty vital in these circumstances.
Kevin: Yes, that’s another great point. If you go to a broker and deal with someone like Andrew as an example, then Andrew is going to be able to look around at the banks who may be looking more favorably at the suburb you’re looking at as an investor as well. Because they wouldn’t all be the same, I would imagine.
Andrew: No. That’s a great point. When we say the suburbs the banks don’t like, different banks will have different concentration levels to different suburbs. So, while one might say, “Look, we’d rather not lend in there, or it’s a 60% loan-to-value ratio,” another one might not have as much concentration there and you’re able to get 80%. So again, like you said, that’s the leg work and the type of thing that we can do to help our clients.
Kevin: Good talking to you. Andrew Mirams from Intuitive Finance. Thanks, mate. It’s why it always pays to talk to the right people, and that’s what we try and do in the show as well. Andrew Mirams, thanks for your time.
Andrew: Pleasure, mate. Bye.