Inner City Unit Mortgage

What are inner city apartments?

Inner city apartments are generally defined by the banks as any unit in a block located in a particular postcode range, generally within the CBD of capital cities. They can often be referred to as high density units or CBD units and tend to have lifts, balconies and sought after views.

Different banks have different policies to define what an inner city unit is and so which lending policies will apply. In some cases a block of units must have at least 4 floors or 35 units in the complex to be defined as inner city apartments.

If the unit you are buying is defined by a bank as an inner city apartment then they may restrict the amount of money that you can borrow.

How much can you borrow?

First home buyer: 95% of the property value (restrictions apply).

Investor: 95% of the property value.

Low doc: 80% of the property value.

Discounts: Competitive professional package and basic loan discounts are available.

Note: Most lenders restrict the amount you can borrow quite significantly, often to 80% or less of the property value. In fact several lenders will not lend to first home buyers at all! That being said at least one of our lenders will approve up to 95% of the property value, please enquire online to discuss your purchase with one of our specialist mortgage brokers.

Which postcodes are considered to be “High Density”?

These vary from lender to lender, however as a general rule the following postcodes are considered to be a high risk and are assessed by lenders under their inner city policy:

NSW Postcodes: 2000, 2001, 2004, 2010, 2011, 2017, 2077, 2138, 2140, 2205.

NSW Suburbs: Sydney, Sydney South, Darling Harbour, Dawes Point, Haymarket, Millers Point, The Rocks, Darlinghurst, Surry Hills, Taylor Square, Elizabeth Bay, Kings Cross, Potts Point, Rushcutters Bay, Woolloomooloo, Waterloo, Zetland, Asquith, Hornsby, Hornsby Heights, Waitara, Concord West, Liberty Grove, Rhodes, Homebush, Homebush South, Homebush West, Arncliffe, Turrella & Wolli Creek.

VIC Postcodes: 3000, 3001, 3004, 3005, 3006 & 3008.

VIC Suburbs: Melbourne, World Trade Centre, Southbank & Docklands.

QLD Postcodes: 4000, 4001, 4002, 4003 & 4004.

QLD Suburbs: Brisbane, Petrie Terrace, Spring Hill, City East, Wintergarden & New Farm (Note that many Gold Coast Apartments are considered “High Density” by lenders even though they are technically not in the inner city of a capital city).

SA Postcodes: 5000, 5001 & 5005.

SA Suburbs: Adelaide City, West Campus, Halifax Street, Hutt Street, Rundle Mall, Station Arcade, Sturt Street & The University Of Adelaide.

WA Postcodes: 6000, 6001, 6003, 6004, 6005.

WA Suburbs: Perth, Highgate, Northbridge, East Perth, Kings Park & West Perth.

TAS Postcodes: 7000.

TAS Suburbs: Glebe, Hobart, Mount Stuart, North Hobart, Queens Domain & West Hobart.

NT Postcodes: 800.

NT Suburbs: Darwin.

There are no locations considered to be high density in the ACT.

Note that there are variations on these postcodes between different banks, please enquire online and one of our mortgage brokers can let you know what restrictions apply for your unit.

Why are the banks so conservative?

In the past there have been periods when the CBDs of several Australian cities were flooded with cheap units. As a result of new developments being constructed, inner city apartments tend to fluctuate in price more often than other types of properties as supply and demand change. Because of these price fluctuations, banks see financing high density units as a higher risk.

Tips for buying an inner city apartment

When you are buying a unit that is close to or in the CBD there is more to consider than when buying a house in the suburbs. We’ve helped countless people to finance the purchase of their high rise unit, and in this time we’ve learned a lot about the possible pitfalls.

Being built out

Be careful to make sure the property will not be built out soon, meaning that a new building will soon block your views. Call your local council and they can tell you what Development Applications are in place in the area.

Size

Ideally try to buy a unit that is greater than 50m2 for the internal area excluding balconies and car spaces. If it is more than 40m2 but less than 50m2 we can still help you to borrow up to 95% however the lenders are more conservative. If you are buying a unit that is less than 40m2 then you may be limited to a mortgage for up to a maximum of 80% of the property value.

Strata fees

Lifts, pools & gyms add a lot to the strata fees. In particular, when a lift needs to be replaced it can cost several hundred thousand dollars. We find that properties with amenities such as pools often don’t receive a better rent income, and that the people who live there often don’t use the amenities anyway! For this reason units in these blocks may have a lower nett rent return than other nearby units.

Block size & age

Smaller blocks tend to be better from an investment point of view. This is because there are less strata issues & they have a higher land value as a proportion of total unit value. Blocks of units that are less than five years old tend to have lower capital growth & brand new units are sometimes sold above market value. Do some research on the builder if you are buying in a new block as building defects are common & can be very costly.

Nearby developments

If a new development is built right next door to your unit then there will often be 100 + units for sale that could compete with yours, in the event that you wanted to sell. This can work in your favour when you are buying however this can make it near impossible to sell during these times. So please keep in mind that the inner city market tends to fluctuate more than most property markets.

Do you need a mortgage?

Our mortgage brokers are experts in financing the purchase of high rise apartments in the CBD. Please call us on 1300 889 743 or enquire online and we can help you to work out how much you can borrow & which lenders you qualify with.

• We know the lending policies of over 30 lenders
• We have specialist knowledge as our mortgage brokers came from the credit departments of major banks
• Most of our services are free
• Help nationwide

For help with your loan, give us a call. We can help make the application process smoother.