RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attemp...
The Commonwealth Bank has revised its property price forecast for 2021 on the back of strong growth in February and March, but its modelling suggests softer growth beyond the first quarter.
The Commonwealth Bank has upgraded its property price growth forecast for calendar year 2021 from 8 per cent to 10 per cent, on the back of an extremely strong first quarter, CEO Matt Comyn said before a Parliamentary hearing in Canberra.
“We expect house prices will continue to grow during the course of this calendar year and next but not at the rate that we’ve seen in February and March, which is quite a rapid,” the CEO said.
“We were thinking 8 per cent, and we are now thinking 10 per cent,” Mr Comyn noted.
Referring to current price growth as “a positive”, Mr Comyn admitted that while CBA initially expected a 10 per cent fall in prices as COVID-19 struck, “they only fell 2 per cent”.
“There’s been a recovery clearly that’s a preferable situation to the alternative.”
Asked about threats to broader financial stability as house prices soar across the country, Mr Comyn said he is not concerned.
“We are not overly concerned with what we are seeing at the moment in the context of broader financial stability,” he said.
The bank’s confidence is underpinned by the fact that the mix of buyers doesn’t resemble previous cycles, with owner-occupiers currently making up 75 per cent of applicants.
Westpac more optimistic
Also addressing the Parliamentary hearing, Westpac’s Peter King revealed a more optimistic forecast. Contrary to CBA’s expectations, Westpac is confident prices will continue to soar.
“We have a forecast of 10 per cent housing prices increase for this year and next year,” Mr King said.
“There is not a lot of turnover in the market and stock is very tight, so houses are being well bid.”
With talk increasing about the possibility of regulatory intervention, Mr King opined that previous macro-prudential measures are not necessary.
“And if we look at things like high LVR lending, the amount of interest-only lending, the amount of investor lending, the three areas that are good indicators… those three areas are much lower than what we saw in the last peak and generally up a little bit but not too much in the last six to 12 months,” Mr King said.
His concern, he said, is that if prudential regulation were to tighten, first home buyers could be the group that takes the brunt.
“One of the concerns that I had around tightening prudential regulation is you can end up in a situation where it favours capital interests or those who have existing capital and harms first home buyers who needed to get a share of their income to borrow,” Mr King concluded.
A house refers to a building or property used as living quarters or an individual’s place of permanent or temporary residence.