Lenders are cautious about issuing loans for properties in areas that they consider risky.

Areas that are considered high density fall into this category and will normally be included in the list of postcode restricted suburbs, which means the lender will either not lend for that location, or the overall loan amount and LVR could be significantly reduced.

A property is considered to be high-density if it is a strata-titled home unit or apartment in a postcode area the lender considers to be a high-density location.

Normally, a building with more than 30 apartments in one of the postcode areas listed by the lender would make it high-density. These are often inner-city CBD-type apartment buildings.

Lenders will often not lend money for what they consider to be ‘investor’ type products with floor spaces of less than 40-45m² of internal living area, excluding balconies and car space.

Houses within high-density locations are normally not included in the high-density postcodes policy, as they are not apartments.  

Lenders restrict loans in areas where there are many high-density apartment buildings, because they can often find themselves in a position where they (as a company or group of lenders) are lending for a high percentage of a certain building. If a lender has exposure to more than 30% of a given building, this is likely to represent too much risk, and they will reject an application for financing space in that building.

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