First home buyers in Australia's growth areas are the next target of Commonwealth Bank of Australia's belt-tightening under a bank plan to curb loans on greenfield housing developments.
A CBA presentation to mortgage brokers, has outlined a plan to effectively delay the approval of finance for buyers of lots until the land is development-ready, with all preliminary work such as roads completed.
Developers said the change will limit land development, putting further pressure on the ability to increase housing supply.
This move will restrict presales. Many developers have to secure presales of up to 50 per cent of all lots on a planned site before banks will lend funds for bulk earthworks and the installation of water, sewerage and electricity services that make it developable.
The move, expected to become CBA policy in the next few weeks, will increase the pressure on developers already hamstrung by slow land release and title processes. It will slash development and send prices surging, developers said.
"If it's adopted by all banks, it will make it more difficult for all developers to fund construction of land for first home buyers and second home buyers," said David Payes, the managing director of developer Intrapac Projects and president of lobby group Urban Development Institute of Australia, Victoria. "We need to supply land to keep housing at affordable prices."
Under the new policy it will only accept valuations on lots – a crucial step in the mortgage approval process – after an external valuer has physically examined the site.
"We believe a more accurate measurement in getting a valuation on unregistered land at an appropriate time should instead be based on the valuer having access to the estate and being able to physically identify the allotment," it said in the presentation.
"This action directly targets the production of new housing stock; jobs, supply, prices and therefore the broader economy will feel the effects of the bank's action," UDIA Victoria chief executive Danni Addison said.
"It is simply neither justifiable nor understandable and could very well lead to a significant contraction in supply and a reduction in new housing options for buyers and renters."