Under the arrangements, loan applications in high density postcodes will not longer be eligible for Automated Valuations Model (AVM) valuations, which is a desktop computer system for producing real estate values.

They are designed to augment, or replace, traditional appraisal reports completed by professional valuers. Under the new arrangements, valuations will be based on visits by an appraiser.

"We recently made a change to our credit policy that will require some properties in high-density suburbs to receive a more detailed property valuation," an AMP spokesman said.

"This ensures we continue to take a prudent approach to lending that is in the best interests of our customers and business," he said. "We are continuing to provide home loans to customers."

BIS Shrapnel, which forecasts property market trends, is warning current apartment completion rates, which this year are expected to be a record high of 230,000, are "unsustainably" high for Victoria.

Suburbs where AMP will require a human valuer to inspect anapartment before they approve a loan against it

Western Australia is expected to fall sharply because of the slowdown following the end of the mining boom.

"The current level of activity is the peak of the cycle, and in the next few years activity will retreat by quite a large margin," said Kim Hawtrey, associate director.


Oversupply risk

"While interest rates are expected to remain low, population growth is slowing and the huge volume of new supply coming in is pushing key markets into oversupply," he said.

There has been a slowdown in overseas buyers because of tougher lending terms and conditions.

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.

NSW will have a persistent undersupply of dwellings and will take longer to slow, the analysis concludes.

Macquarie Group also has a "bearish perspective on multi-residential activity", according to a recent report.

The group's bank recently hit the brakes on lending to high-rise and high-density apartment dwellings in up to 12 postcodes around the nation amid growing fears about falling demand and oversupply.

Inside out

Problems are compounded in places like Victoria because of long-running disagreements between developers and surveyors about whether apartments are measured from the inside, outside or midpoint of the perimeter wall.

That means a buyer could purchase the property at an advertised size that is larger than a surveyor's measurement used by the bank for assessing the loan.

Developers and estate agents usually measure from outside, resulting in larger sizes than that considered by surveyors and banks, which typically measure from the inside.