Sydney: Soaring home prices in Australia’s biggest cities don’t necessarily mean the country is in the grip of a housing bubble, according to the heads of the nation’s biggest banks.
Testifying before a parliamentary committee, chief executives of National Australia Bank Ltd., Westpac Banking Corp. and Commonwealth Bank of Australia all said that while they are worried about elements of the housing market, prices aren’t over-inflated.
“I would draw the distinction between a speculative bubble in prices and prices beyond what fundamentals would justify,” Westpac’s Brian Hartzer told the committee. A bubble isn’t occurring in Sydney or Melbourne, where house prices have risen the most, he said.
“There are increasing risks, but I still believe the answer is no,” National Australia Bank’s Andrew Thorburn said when asked if houses in Sydney and Melbourne are overpriced.
Commonwealth Bank, the nation’s largest mortgage lender, is “lending at levels we are comfortable with” across Australia, CEO Ian Narev said.
The bank chiefs were appearing in front of the committee, which was set up by the government to ward off calls for a more far-reaching inquiry into the financial industry, for the second time within six months.
Australia & New Zealand Banking Group Ltd. CEO Shayne Elliott wasn’t directly asked about his views on the housing market when he testified, but speaking before Christmas said that while he is cautious, he isn’t anticipating “a calamity or a disaster”.
Prices in Melbourne and Sydney have skyrocketed in recent years, fuelled by record-low interest rates, increased demand from overseas buyers and tax breaks for property investors. The Organisation for Economic Co-operation and Development last week said the biggest threat to Australia’s economy is a hard landing in the property market.
The rapid price growth, at a time of anemic pay increases, has made housing affordability a hot-button political issue. Victoria’s state government said March 5 it will exempt first-time buyers from paying stamp duty on properties worth less than A$600,000 ($455,000, Dh1.6 million), and plans to introduce a tax on vacant residences.
Prices in Sydney and Melbourne are rising because that is where jobs are being created and “we do not have long-term infrastructure,” Thorburn said.
The big four banks - where property lending accounts for between 40 and 60 percent of the loan book - have been tightening mortgage and development lending criteria.
One persistent concern has been the risk of an apartment glut developing in Melbourne and Brisbane, with overseas buyers getting caught by the clampdown on lending and the enforcement of Chinese capital controls.
Hartzer told the committee he is receiving a weekly email on key development projects and settlements are proceeding, albeit slowly.