Bank names Sydney investor hotspots under surveillance

One of Australia's biggest challenger banks has named the Sydney suburbs it is currently monitoring after experiencing significant volumes of home lending to residential property investors.

Rob Love, St. George Bank’s head of credit, said the Sydney suburbs of Rhodes, Ryde, Epping and Eastwood are “real areas of interest” for the lender.

Mr Love named the Sydney suburbs in a speech last month at the St. George Bank Flame Forum 2015, where his presentation included an internal ring in the Western suburbs and a broader ring around the areas mentioned. One postcode highlighted in the presentation was 2137, which includes the areas of Breakfast Point, Cabarita, Concord, Mortlake and North Strathfield.

“If you had a very high LVR investment property loan in that postcode, it is probably a group of loans we would want to monitor over a period of time,” Mr Love said.

“We are very interested in the volume of business that has been written in that area and we want to make sure we are writing to the right quality of customer going forward.”

Rather than stopping lending in these areas, Mr Love stressed that the bank has highlighted them for monitoring reasons to track their performance from a credit perspective.

“It is from a monitoring perspective to see how they perform. Looking at things like what is that group of customers’ pre-payment rate compared to Sydney and across the board? We are certainly not saying we are going to slow lending in those geographies. It’s an area of interest.”

While St. George is unlikely to implement credit policy at a postcode level, Mr Love said the suburb analysis could help the bank understand more specific market trends.

“If there are more SMSF properties being purchased in particular areas, or if non-resident lending is driving unit sales, for example,” he said.

“That’s what we’re doing at the moment – spending a lot of time looking at [a] postcode analysis to explain what the real hotspots in our portfolio are.”

Last week Fairfax Media reported that NAB had named inner-city suburbs at risk of mortgage default.

While greater attention was given to mining towns in Western Australia and Queensland, NAB also included 34 Sydney postcodes and five Melbourne postcodes on a watchlist of areas it believes "are exhibiting characteristics which may indicate future deterioration in credit risk", according to Fairfax.

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