Apartments in more than 140 suburbs are on a confidential blacklist because of growing concerns about oversupply, off-the-plan sales, and, in some areas, falling prices, according to leaked documents.

AMP Bank, the banking division of the largest financial services group that compiled the list, claims it is a “prudent” response to managing risks of “over-supply”, which could push down prices, rents and lead to defaults.

“We have identified certain high density areas where we have put provisions in place to manage risk and over-supply,” a spokesman says. “We take a prudent approach to managing risk,” she says.

AMP is one of several big lenders circulating blacklists of suburbs where apartment buyers will face tougher terms and conditions, including increased scrutiny of their ability to pay.

It is focusing on developments of more than 10 apartments being built around state capitals and inner-suburban postcodes where there are high volumes of new, or soon-to-be-completed complexes.

Suburbs more than 10-kilometres from Sydney’s central business district, such as Homebush and Arncliffe, where there is a lot of apartment building underway, have recently been added to the list.

AMP borrowers will face tougher terms on the amount borrowed, number of apartments purchased in a single development and a ban on using some incentives offered by developers, such as rental guarantees.

Other lenders have recently issued similar warnings about former real estate hot spots that have gone cold, typically in former mining boom towns of Perth and Darwin, where rents and prices have been tumbling.

Rock Building Society has reviewed and expanded its list of “high risk” postcodes and issued a limit on luxury properties and maximum loan-to-value ratios for those properties of 70 per cent.

ANZ is circulating a list of 50 postcodes, concentrated around Western Australia, Queensland and NSW mining towns, that is describes as “not acceptable” for providing lenders mortgage insurance, which is a one-off insurance payment that protects lenders against default.

It is also impose tougher controls on the use of commission and overtime payments used in calculating buyer’s ability to service a mortgage.

AMP’s “high risk” list targets state capitals, particularly Melbourne and Sydney, where the building of apartment buildings has boomed because of demand from investors and first-time buyers that cannot afford a house in suburbs.

The main Melbourne focus is the central business district and nearby Docklands and Southbank, where large numbers of high rise complexes continue to be built.

Melbourne’s overall apartment prices are up about 5 per cent and rents around 4 per cent during the past 12 months, according to SQM Research, a company that analyses property prices.

But there are pockets of over-supply, which could be worsened by imminent completions of major construction projects.

In Sydney the focus is also for developments around the central business district and inner suburbs of Dawes Point, Darling Harbour, Millers Point and Sydney South.

Sydney, which as been the nation’s top performing residential property market, posted rises of nearly 10 per cent for apartments and 5.5 per cent for rents during the past 12 months, according to SQM.

Inner Brisbane, which has been issued a buyer ‘red alert’ by SQM because of concerns about over-supply, is also on AMP’s watch-list.

Queensland accounts for an additional 73 suburbs, which is more than half the nation’s total, including Cairns and many suburbs along the Gold Coast, including Broadbeach, Mermaid Waters and Florida Gardens.

Prices of Brisbane units have increased by about 1 per cent during the past 12 months and rents are up by about 2.4 per cent, according to SQM.

Developers are offering buyers three year rental guarantees on sales, which are three- to-four bedroom apartments selling for about $500,000.

Lenders are concerned about the number of new apartments expected to flood onto the market over the coming 12 months, adding to a large existing inventory of unsold, or vacated, apartments in many markets.

An estimated 45,000 apartments are due for completion and settlement over the next nine months to Christmas in Melbourne, Sydney and Brisbane, an increase of nearly 25 per cent compared to last year, according to planning consultancy MacroPlan Dimasi.

Another 53,000 could be coming to market in the same postcodes next year, the consultancy estimates.

Perth, where unit prices have fallen by 9 per cent during the past 12 months, has more than 30 blacklisted suburbs, particularly around central and east Perth, where rents are routinely being slashed by increasingly desperate landlords.

Darwin, which is also struggling to absorb developments that were commenced during the mining boom, is also listed.

Lenders are also worried that off-the-plan investors might not be able to bridge a deposit gap caused by lower loan-to-value ratios, which means bigger deposits before settlement.

A recent survey by WBP Property revealed nearly half off-the-plan sales in the eight months to last August were in negative equity, which means worth less than the purchase price.

Average losses were about $40,000, or about 10 per cent, between agreement to buy and pre-settlement valuation, which is required by lenders to assess any changes in value and he amount of money a lender can borrow.

Buyers have to bridge the gap between the purchase price and final valuation, which can result in contract breach, deposit loss and, potentially, legal action by vendors.

AMP, which says its analysis is based on in-house and independent consultancy, says borrowing restrictions target what it describes as “high density” areas, which are apartments in complexes with more than 10 units and located within the blacklisted postcodes.

Under the new lending arrangements, loan-to-value ratios are up to 90 per cent, there is a maximum of two apartments per borrower on any development, rental guarantees will not be accepted and a cap of 25 per cent of any individual development, or 10 units, which ever is the bigger.

Other lenders, such as ING Direct, recently banned inducements of rebates, special conditions, furniture, televisions and cars to buyers to complete their off-the-plan deals.

Lenders fear the undisclosed incentives could increase the value of a property in a way that cannot be transferred to success buyers.

This story was first published in the AFR.