In its annual report this week, Westpac noted that housing has continued to be a hotly discussed topic through the year with price rises leading some commentators to claim that we are in the midst of a housing bubble.
“There is no doubt housing prices are strong in some markets, but we do not subscribe to the view that we are in a bubble,” Westpac CEO Brian Hartzer said.
“That’s because we believe the economics of Australian housing are sound.
“We are seeing genuine demand for housing that has consistently exceeded supply from both investors and owner-occupiers. It is only recently that we have seen an increase in building activity to help match demand.”
Mr Hartzer stressed that there has been no easing in credit standards across the industry.
“By that I mean we continue to lend to those people who have the capacity to repay, and the standards by which we measure that capacity have not relaxed—in fact we tightened our lending criteria in a number of areas this year,” he said.
“So overall we see the housing market as rational, with sound fundamentals. Of course, that does not mean we will not see stress in selected pockets.”
Mr Hartzer said the housing market will always remain a local proposition, and Westpac continues to monitor its exposures at a local area level (and sometimes a building-by-building level).
“In addition, we recognise that housing affordability continues to be an issue in the community,” he said. “Nevertheless we are not expecting a major housing downturn.”
The Westpac boss also highlighted that due to regulatory requirements the bank must increase the amount of capital it holds against mortgages by over 50 per cent.
In addition to capital raisings, the group last month increased its variable mortgage interest rates by up to 20 basis points.