Big four banks bullish on housing prices

• The big four banks are predicting double-digit house price growth for 2021 as prices continue to soar across the nation
• Common themes among the banks at the House of Representatives’ economics standing committee meeting include predicted growth in house prices, a high mix of owner-occupier loans and a resumption of deferred loan repayments
• Most bullish of the four was ANZ CEO Shayne Elliot, who told the committee that the bank is still supporting its earlier stance that housing prices could rise by 17 per cent this year
• CBA said 75 per cent of home loans are from owner-occupiers, a mix that does not resemble previous cycles
• NAB called on state governments to increase housing supply by streamlining approval processes for land development and residential construction to offset price growth

The big four banks are predicting double-digit house price growth for 2021 as prices continue to soar across the nation.

The banks appeared before the House of Representatives’ economics standing committee last week and were asked about their predictions for the hot housing market.

Common themes among the banks include a predicted growth in house prices, a high mix of owner-occupier loans and a resumption of deferred loan repayments.

ANZ

Most bullish of the four was ANZ CEO Shayne Elliot, who told the committee that the bank is still supporting its earlier stance that housing prices could rise by 17 per cent this year.

“We expect continued gains in house prices before they taper off next year,” he said in his opening statement. “Much of this activity is from owner-occupiers.”

“Pleasingly, our loans to first home buyers over the last three months are up 75 per cent on last year and, across the industry, those getting into property for the first time are taking out 35 per cent of owner-occupier loans.”

Buyers are being helped by low interest rates, high levels of savings and government policies, according to Elliot.

“For example, we’ve seen a significant increase in construction loans, and applaud the Government’s HomeBuilder program for helping Australians,” he said.

“We agree that price increases need to be watched and credit standards maintained to ensure the financial system remains stable.”

Over the last year, ANZ has provided around 96,000 payment deferrals on home loans worth $33 billion in Australia, and the bank said almost all have resumed paying off their loans.

CBA

The Commonwealth Bank has boosted its price predictions on the back of a strong opening 2021 quarter.

CEO Matt Comyn said they expect house prices to grow this year, with 2021 set to witness growth but not at the same pace.

“We were thinking eight per cent, and we are now thinking 10 per cent,” Comyn said.

Comyn also recognised incorrect predictions made at the start of the COVID-19 pandemic, saying property prices only fell two per cent, despite their prediction of 10 per cent falls.

The bank said 75 per cent of their home loans are from owner-occupiers, a mix that does not resemble previous cycles.

“While we continue to monitor housing demand closely—conscious, as we are, of any build-up of systemic risk — a number of factors distinguish this period from price increases we have seen in prior cycles,” Comyn said in the bank’s opening statement.

“Some of the largest price gains have been outside of the major cities, areas which had seen subdued price increases or even falls in the preceding years. Also, a much greater share of demand in this instance is coming from first home buyers and owner-occupiers,” he added

NAB

Also speaking on house prices to the committee, NAB CEO Ross McEwan agreed with his counterparts that house prices are going to go up this year.

“It may well be in excess of 10 per cent,” he said.

He noted that the growth was not evenly spread, properties in cities saw 4.8 per cent growth, while the regions enjoyed a 11.4 per cent bump.

McEwan did warn, however, that house prices fluctuate for a number of reasons, and highlighted their estimate in previous committee meetings where they predicted house price to go down by 8 to 10 per cent.

They also noted good news in the repayment of loan deferrals, with 98 per cent of the 130,000 deferred business and mortgage loans no longer on deferral.

The CEO also called on state governments to increase housing supply by streamlining approval processes for land development and residential construction to offset price growth.

Westpac

Westpac are also bullish on housing prices, telling the committee the bank expects prices to continue its rapid growth.

“We have a forecast of 10 per cent housing prices increase for this year and next year,” Westpac CEO Peter King said.

“There is not a lot of turnover in the market and stock is very tight, so houses are being well bid.”

Like the other banks, Westpac has also witnessed that activity in the market is different from the last boom.

“If we look at high LVR, interest-only and investor lending … these three are much lower than we saw at the last peak and up a little bit but not too much on the last six to 12 months,” King said.

Westpac has also noted that most customers who received a deferral have returned to making payments.