Postcode Restrictions- Why are they important.

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Postcode Restrictions- Why are they important.


Lenders are generally risk averse. The general rule used when determining the value of a security is determined by statistics of what type of house will sell well in a given suburb. Any variation on this incurs a decrease in LVR or some other restriction. This can be seen in postcode restrictions.

Apartments are a classic example- If the property is an apartment and there are many apartments in the area then there is a high likelihood that it will become harder for the lender to sell the securitised property in the event of a default. This explains why there is a lowering of the LVR for properties in the Melbourne CBD. There are also restrictions on certain types of high density buildings- if you are thinking of buying in these locations you really need a finance brokers advice on LVR restrictions. Contact us if you want to know more.

Remote locations are another example: – Real estate Sales in remote locations have traditionally been lower making it harder to sell property. Hence the property purchased in Broome for example may incur a lower corresponding LVR compared to a similar property in Melbourne.

Other restrictions include:

  • Single commodity dependent towns.
  • Rural land size greater than a certain size.
  • Distance from a capital city.

Some lenders will reject these sorts of properties outright. The role of the finance broker here becomes analysing the factors of the specific property that distinguishes it from the rest of the properties in that location, and present these findings to the bank to aid in the credit assessment.

Despite the restrictions there is opportunity in these purchases if the numbers look right and there is knowledge of an industry setting up in that area. Industry means jobs and jobs mean accommodation needed. Mining industry in the early to mid-2000’s have seen double digit percentage growth in Perth property prices which was unheard off in Melbourne at that time.

Coming back to the title of this post. Which is the best place to buy? Opportunity and risk are two sides of the same coin. It is prudent to take the advice of finance professionals when making the decision to buy in a specific location. A 10 percent difference could mean having to find $ 50000 dollars more on a $ 500000 dollar property. So call us on the number below to discuss your finance needs or a pre-approval. It could save you thousands!

Objective Financial Solutions Pty Ltd ATF Mahadeva Family Trust. Credit Representative number: 474831 Licensee of Connective Credit Services. Australian Credit License: 389328 email:  website: Phone: 0413788582

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