Macquarie Bank is under fire for including Cairns on a warning list of 120 "risky" suburbs for investment in new apartments.

The Macquarie report highlights postcodes across the nation that the bank believes are most at risk from an oversupply of units in a slowing market.

Most of the 120 suburbs listed are in capital cities, particularly Sydney and Melbourne where more than 200,000 units are expected to be built over the coming year.

But Cairns (4870) and Palm Cove (4879) were among just a handful of regional postcodes included on the list.

Macquarie Bank has introduced restrictions and special conditions on loans for high-rise apartments, with measures such as higher deposits now in place.

Local industry players told Tropic Now the report was "flimsy" and inaccurate, with potential to cause serious damage for investment in the region.

They say the Macquarie report was not "ground-truthed" and failed to take into account the reality of proposals, project timelines and approvals.

For example, the Macquarie report relies heavily on building approval from local councils. That means huge proposals such as Aspial's Nova towers, the nearby C3 development and the Golden Lakes project at Paradise Palms were captured in the approvals data.

Those three projects alone account for around 2000 units. On paper, that could lead to an over-supply in Cairns if they were built and released to the market all at the same time. 

But none of these projects have clear timelines for when - or even if - they'll proceed to construction. And if they do proceed, each will be rolled out in stages over many years to align with local market conditions.

In short, there's a disconnect in the Macquarie report between what's approved on paper in Cairns and the actual rollout of unit supply over coming months and years.

Conus economist Pete Faulkner said he could see both sides of the debate, with banks having little else to go on except for building approval data.

But he agrees the inclusion of Cairns on the "risky" list may have been unwarranted and could pose unintentionally dire consequences for the local economy.

"From Macquarie's perspective, the only realistic way to look at a potential oversupply in the future is to look at approvals, and their list of risky suburbs is about trying to preempt what might happen," Mr Faulkner said.

"But the argument from local developers does have some validity because some approvals, particularly on very large projects in Cairns, often don't actually end up being built. I'm not saying that will be the case for projects like those mentioned but in general approvals can sit on council's books for a long time without ever happening.

"I do struggle to see why Macquarie would include Cairns on that list given the trend of very low levels of approvals, even when those big projects are included.

"It would be a great pity if a report like this was to suggest investing in Cairns was risky because of a future oversupply when in fact we're only just clawing our way off the bottom."