NAB, Westpac bosses reject house price fears
2015-10-15
Two of the chief executives of Australia's big four banks have hit back at predictions of a sharp correction in house prices.
After Macquarie Group, Credit Suisse and Bank of America Merrill Lynch all flagged growing risks in housing – with Macquarie tipping a 7.5 per cent fall in prices across the nation – the big bank bosses say that while the rate of growth will subside, it will nonetheless remain positive thanks to the country's population growth and its geography limiting the supply of new houses.
National Australia Bank chief Andrew Thorburn said that while the weaker global economy and local regulatory caps on lending to property investors would see the pace of price rises slow, home prices in Sydney and Melbourne would rise at high single-digit rates due to strong demand and limited supply of housing close to the city centres.
"You will see in Sydney and Melbourne high single-digit rates of growth as being quite plausible given the fundamental drivers of what are pushing those prices up," he said at an Australian Israel Chamber of Commerce lunch in Sydney on Wednesday.
According to RP Data, house prices in Sydney have climbed 17.6 per cent over the past year while prices in Melbourne are up 15.6 per cent.
Westpac chief Brian Hartzer said conditions in the housing markets were "still pretty reasonable".
"There continues to be good underlying demand for housing and in some markets, particularly NSW, a deficit of housing relative to that demand. So we think that should underpin things," he told Fairfax Media after the bank announced a $3.5 billion capital raising on Wednesday and an increase in interest rates on home loans by 0.20 percentage points.
"There are some challenges around, but it's reasonably strong, and particularly we've seen a pick up in demand for owner-occupied housing, even as the changes on investment property lending have come down," Mr Hartzer said.
"So all of those things together make us feel that there's still a reasonable amount of support, and we don't agree with the people at the extreme who say there's a big bubble that's about to burst."
Westpac's move to raise rates on Wednesday outside any move in the cash rate by the Reserve Bank of Australia is expected to help to cool the rapid growth in house prices, especially if the other banks also raise their interest rates.
Mr Hartzer said a reduction in the levels of house price growth would be healthy for economic stability.
"What we've seen is strong growth, particularly in the Sydney housing market. We would expect, and we think it would be sensible, if the growth rate slowed. The main thing we all want to avoid is a speculative housing boom, where people are buying houses because they believe the price is going to go up rapidly in the near future, and are using debt to do that. That's not healthy.
"We don't see evidence of people speculating in house prices, we see house prices going up in response to supply and demand."
Both bank chiefs also pointed to Australia's dual economy, noting that conditions in property markets are much softer outside of Sydney and Melbourne.
Mr Thorburn said if you talk to people in regional areas, Perth Adelaide or Brisbane, "they are not saying house prices are going up too rapidly. Sydney and Melbourne are a particular case." RP Data says Adelaide and Perth house are flat on the year while Brisbane is up around 5 per cent.
Earlier this week, Macquarie forecast on Monday a "7.5 per cent reduction from peak to trough", while Credit Suisse said Australian property is now riskier than shares, particularly in NSW. "Home buying conditions have deteriorated sharply," the investment bank warned.
Bank of America Merrill Lynch, meanwhile, said high indebtedness, coupled with a downturn in house building and prices, could hit consumer spending and property investment once interest rates started to rise.
For now levels of borrower stress in the banks remain very low. In its unaudited financial results for the full year released on Wednesday, Westpac said mortgage delinquencies had declined because low interest rates were helping borrowers pay down debt.
But Mr Thorburn said in his speech on Wednesday that one of the biggest risk for the banks is rising unemployment.
"While interest rates are at an all time low we have more people head on repayments than ever before, but the key driver here is unemployment. With unemployment at around 6 per cent and generally forecast to drift down rather than drift up, I think that is the best indicator we can look at as to the confidence in the economy generally and housing specifically."
Source: http://www.smh.com.au/business/property/brian-hartzer-andrew-thorburn-tip-further-house-price-growth-20151014-gk9gf6.html
After Macquarie Group, Credit Suisse and Bank of America Merrill Lynch all flagged growing risks in housing – with Macquarie tipping a 7.5 per cent fall in prices across the nation – the big bank bosses say that while the rate of growth will subside, it will nonetheless remain positive thanks to the country's population growth and its geography limiting the supply of new houses.
"You will see in Sydney and Melbourne high single-digit rates of growth as being quite plausible given the fundamental drivers of what are pushing those prices up," he said at an Australian Israel Chamber of Commerce lunch in Sydney on Wednesday.
According to RP Data, house prices in Sydney have climbed 17.6 per cent over the past year while prices in Melbourne are up 15.6 per cent.
Westpac chief Brian Hartzer said conditions in the housing markets were "still pretty reasonable".
"There continues to be good underlying demand for housing and in some markets, particularly NSW, a deficit of housing relative to that demand. So we think that should underpin things," he told Fairfax Media after the bank announced a $3.5 billion capital raising on Wednesday and an increase in interest rates on home loans by 0.20 percentage points.
"There are some challenges around, but it's reasonably strong, and particularly we've seen a pick up in demand for owner-occupied housing, even as the changes on investment property lending have come down," Mr Hartzer said.
"So all of those things together make us feel that there's still a reasonable amount of support, and we don't agree with the people at the extreme who say there's a big bubble that's about to burst."
Westpac's move to raise rates on Wednesday outside any move in the cash rate by the Reserve Bank of Australia is expected to help to cool the rapid growth in house prices, especially if the other banks also raise their interest rates.
Mr Hartzer said a reduction in the levels of house price growth would be healthy for economic stability.
"What we've seen is strong growth, particularly in the Sydney housing market. We would expect, and we think it would be sensible, if the growth rate slowed. The main thing we all want to avoid is a speculative housing boom, where people are buying houses because they believe the price is going to go up rapidly in the near future, and are using debt to do that. That's not healthy.
"We don't see evidence of people speculating in house prices, we see house prices going up in response to supply and demand."
Both bank chiefs also pointed to Australia's dual economy, noting that conditions in property markets are much softer outside of Sydney and Melbourne.
Mr Thorburn said if you talk to people in regional areas, Perth Adelaide or Brisbane, "they are not saying house prices are going up too rapidly. Sydney and Melbourne are a particular case." RP Data says Adelaide and Perth house are flat on the year while Brisbane is up around 5 per cent.
Earlier this week, Macquarie forecast on Monday a "7.5 per cent reduction from peak to trough", while Credit Suisse said Australian property is now riskier than shares, particularly in NSW. "Home buying conditions have deteriorated sharply," the investment bank warned.
Bank of America Merrill Lynch, meanwhile, said high indebtedness, coupled with a downturn in house building and prices, could hit consumer spending and property investment once interest rates started to rise.
For now levels of borrower stress in the banks remain very low. In its unaudited financial results for the full year released on Wednesday, Westpac said mortgage delinquencies had declined because low interest rates were helping borrowers pay down debt.
But Mr Thorburn said in his speech on Wednesday that one of the biggest risk for the banks is rising unemployment.
"While interest rates are at an all time low we have more people head on repayments than ever before, but the key driver here is unemployment. With unemployment at around 6 per cent and generally forecast to drift down rather than drift up, I think that is the best indicator we can look at as to the confidence in the economy generally and housing specifically."
Source: http://www.smh.com.au/business/property/brian-hartzer-andrew-thorburn-tip-further-house-price-growth-20151014-gk9gf6.html
- *E-mail：
- *Cel：
- *Password：
