Most financial institutions place restrictions on lending in relation to genuine 1 bedroom apartments based on internal floor area. This policy is ridiculous and archaic. The fact that these financial institutions place such a high emphasis on floor area only demonstrates that they do not understand the fundamentals of real estate, an amazing reality given their resources.
Floor area is a lower order factor when assessing the capital growth potential of a 1 bedroom apartment. In this article I am strictly referring to a genuine 1 bedroom apartment and not a bed sit or studio apartment.
The major drivers of capital growth in relation to a 1 bedroom apartment is distance to amenities, quality of streetscape, low density block, car parking on title, type of title etc. Assessing a 1 bedroom apartment according to the above criteria is a more accurate way of ascertaining the quality of the lender’s security.
First homebuyers are most affected by this policy. The1 bedroom apartment market provides first homebuyers the opportunity to enter the market in an affordable way.
Also, provided the correct selection is made they will benefit from exceptional capital growth which will assist them greatly when they decide to upgrade in the future.
Because of spiraling prices, first home buyers are already facing an uphill battle attempting to enter the market. Unfortunately this restriction on lending based on floor area is making it much more difficult for first home buyers to enter the market.
