(Australian Associated Press)
ANZ chief executive Shayne Elliott says domestic buyers are still the biggest driver of demand for apartments in Australia’s major cities, playing down fears that restrictions on foreign investors are behind a looming oversupply.
Australian banks this year tightened lending criteria for foreign investors in response to APRA’s 10 per cent cap on lending growth to that market.
The Reserve Bank last month cited those tighter criteria when it warned an emerging oversupply of Brisbane and Melbourne apartments was already hitting settlements.
Mr Elliott on Wednesday acknowledged that foreign investor money, particularly from China, was still entering the Australian property market but said it is not the main driver of demand.
“The reality is there is still very, very strong household formation in Australia and that’s the number one driver of demand for apartments,” Mr Elliott told a Reuters Newsmaker event in Sydney.
“Foreign investor money has kind of been the cream on the top. That has slowed a little bit.”
Nonetheless, Mr Elliott echoed the RBA’s concerns – also repeated on Wednesday by Bank of Queensland chairman Roger Davis – there could soon be a shortage of buyers for apartments across east coast capital cities.
“There are pockets of the market, namely smallish apartments – in Melbourne in particular but also in Brisbane and starting to be here in NSW as well – and you look and say there’s going to be an excess of supply,” Mr Elliott said.
“That’s not to say it’s going to be a calamity or a disaster, but we should be cautious.”
Mr Elliott also said domestic borrowers could face out-of-cycle rate mortgage rate hikes if banks’ costs of doing business increased dramatically.
“It’s absolutely reasonable to expect that,” he said.
“While the RBA cash rate is an important ingredient in cost of funds, it is not the only ingredient.”
The major lenders’ decision not to pass on the full benefit of the RBA’s last 0.25 percentage point cut to the cash rate angered consumers and was a major topic of discussion when the big four’s chief executives appeared before a parliamentary committee last month.
But Mr Elliott said the banks had done a good job of explaining why the cash rate and mortgage rates do not exactly correlate, and said ANZ wasn’t in the business of trying to “squeeze more margin out of customers.”
He said the bank had decided against awarding staff their annual share bonus after an 18 per cent fall in annual profit to $5.9 billion.
“A tough decision’s been made to cut our executive remuneration,” he said.
“It is a bonus and that bonus is intended to share the benefit of when we have a good year, and this was not a good year.”