Westpac CEO Hartzer says ‘no bubble’ in housing, but market stretched

Westpac chief executive Brian Hartzer has rejected speculation that there was a “housing bubble” while admitting that the market was stretched in some areas.

The CEO of the country’s second-largest bank repeated the same view he expressed before a parliamentary committee in March in an interview with The Weekend Australian ahead of the bank’s 200th anniversary.

“I would draw the distinction between a speculative bubble in prices and prices beyond what fundamentals would justify," Hartzer told the parliamentary committee.

He described the property market as “certainly complex”, with wide variations across regions, he told the newspaper. “Western Australia and Queensland are obviously having real challenges and we have some very unusual dynamics going on in the Sydney and Melbourne real estate markets.”

Hartzer said the bank did not believe there was a property bubble “in terms of people speculating on the value of properties going up and using leverage to do it”.

But he said high housing prices was more because of supply constraints than ­excessive demand, noting that “some of the fundamentals around value are looking pretty stretched in some parts of the market”. 

Westpac expects that supply issues could be solved by working with developers and state and local governments, which would reduce the pressure on the housing market and also lower “risk” over time.

Westpac recently said it was not worried by the latest note from the Australian Prudential Regulation Authority to tighten requirements for investor and interest-only loans as the bank had already taken action in the interest-only lending area.

“We have been clear in our communications around wanting an interest rate differential for ­interest-only loans to encourage people to move to principal and interest loans,” he said.

The bank recently raised variable home loan rate for owner occupiers by 0.08 percent to 5.49 percent per annum for customers with interest only loans and for investors with interest-only loans, by 0.28 percent to 5.96 percent per annum. 

Hartzer said the bank was already well below APRA’s 10 percent cap on investor lending, with its lending for investor loans at 5.9 percent of its total mortgage book at the time of its full-year ­results at the end of September last year.

He said the bank was celebrating its 200th anniversary at a time when the political system was “finely balanced” with the banks having become a “pretty convenient target” for criticism, including an opposition promising to hold a royal commission into the banking industry.