ANZ’s Chronican Says Australian House Bubble Concerns Overstated
Concerns of a housing bubble in Australia are overstated because weak jobs growth and buyer caution will damp gains in home prices, Australia & New Zealand Banking Group Ltd.’s (ANZ) local chief executive officer said.
House prices will rise about 5 percent over the next 12 months, while rising costs and regulation constrain the number of new homes, ANZ’s Philip Chronican said in a speech today. The Melbourne-based bank expects the shortfall of dwellings in Australia to increase from 270,000, which is equal to 20 months of construction, to 370,000 by 2015, he said.
Home prices in Australia’s biggest cities rose 5.1 percent in the eight months to Aug. 31, according to the RP Data-Rismark Home Value Index. Prices in the six months to August increased at the fastest pace in three years. The Reserve Bank of Australia, in its Financial Stability Review yesterday, urged banks to maintain prudent lending standards in the face of growing housing market activity.
“The increase in prices recently has reignited speculation of a potential house price bubble,” Chronican said. “I do think this concern is overstated. At least part of the recent strength has simply been a rebound after a period of quite soft prices.”
In May, ANZ, the smallest mortgage lender among Australia’s big four banks, reduced its benchmark mortgage rate by 27 basis points, the first time since 2008 that one of the nation’s four major lenders had passed on more than the central bank’s own rate reduction, which was 25 basis points. ANZ lowered its mortgage rate again in August by 25 basis points, matching the RBA’s cash rate reduction in that month.
ANZ and National Australia Bank Ltd. are offering the lowest standard mortgage rate among the big four banks.
“Of particular importance is that banks maintain prudent risk appetite and lending practices, especially in the current low interest rate environment,” the RBA said in its review. “It is important that those purchasing property do so with realistic expectations of future dwelling price growth.”
ANZ’s shares fell 0.2 percent to A$31.36 as of 2:48 p.m. and the benchmark S&P/ASX 200 Index was 0.1 percent higher.
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