Westpac boss says housing affordability is getting worse

Westpac chief executive Peter King has underlined a deterioration in housing affordability, saying regulators should wait for lockdowns to end before assessing whether there was a need for lending curbs to be introduced.

As ultra-low interest rates continue to push up property prices, Mr King said a key question was whether the market would slow down on its own because houses had become so expensive for buyers.

Facing a wide range of questions from a regular parliamentary inquiry on Thursday, Mr King also indicated the banking giant would be joining the stampede into the buy now, pay later (BNPL) sector, with an unspecified product planned for later this year.

Despite lockdowns hitting the economy hard this quarter, house prices have continued to climb briskly in recent months, albeit at a slower pace than earlier in the year.

Mr King said the bank’s preferred measure of housing affordability- the time it takes to save a deposit for an average house – was close to worst it has been in thirty years.

“It’s at the worst level it’s been for some time,” he said before the House of Representatives economics committee. “When we look at housing affordability at the moment it’s pretty stretched.”

Mr King, who runs the country’s second largest mortgage lender, said the causes included the very low level of interest rates, alongside an imbalance between housing supply and demand.

“All asset prices have gone up with low-interest rates and plenty of money in the economy,” he said. “We’ve still got more demand than supply, so that’s pushing prices up.”

As prices have soared, there has been a debate throughout the year over whether lending curbs or “macro-prudential” policies will be needed to rein in risky lending. Mr King said regulators should wait until at least lockdowns were finished, before assessing how the market was behaving.

He said lending curbs could possibly be part of the solution, alongside moves to increase the supply of housing and help people save deposits to purchase a home.

“If debt is playing a role in property prices, we might need macroprudential, but it’s not just debt that is playing a role,” Mr King said in response to a question from committee chairman, Liberal MP Tim Wilson.

Mr King, who appeared following National Australia Bank chief executive Ross McEwan, was also questioned about the booming BNPL sector, including Westpac’s partnership with Afterpay.

Banks including Suncorp, Commonwealth Bank and Citi are already moving into BNPL, as the likes of Afterpay compete with credit cards, and Mr King said Westpac was also planning a move into the sector. “We will move into it later this year,” he said, without providing further details.

The bank is expected to launch a product with BNPL features later this year, with further moves being planned for next year.


Article Source: www.brisbanetimes.com.au