Some cooling of the market "would be a good thing in terms of long-term stability," bank boss says
Commonwealth Bank is predicting a slowdown in Australia’s booming property market, chief executive Matt Comyn said.
Comyn told MarketWatch that home loan activity may slow due to COVID-19 lockdowns in many cities, as happened during the Melbourne lockdown last year.
“I think under any reasonable analysis, the very strong performance of the housing market exceeded expectations over the last 12 or 15 months and a period of stabilization, and you certainly expect to see a slowing in some markets due to just affordability constraints,” Comyn said. “We can already see that in some segments like first-home buyers. I think a tapering or certainly a reduction in those sorts of growth rates would be a good thing in terms of long-term stability and accessibility of people into the property market.”
CBA expects the economy to bounce back strongly when the current lockdowns are lifted, with a possible rebound from property markets affected by the latest restriction, MarketWatch reported.
“Prior to the latest lockdown, our research shows that most customers are more confident about the future, more in control of their finances, have saved more, spent less and paid down debt than a year ago,” Comyn said.
Despite the bank’s confidence about its mortgage portfolio, CBA recently increased the floor rate it uses for servicing to 5.25%, according to MarketWatch – much higher than where interest rates currently sit.
Read next: Regulators may step in to cool market, RBA warns
“We’re already testing whether our customers can repay their loans in a much higher interest-rate environment,” Comyn said. “But I think these are the sorts of practical steps that could be taken across the industry to gradually ease the property market, if it felt that it was increasing at too rapid a rate.”
Comyn said that it was a “good thing” that some of the growth in Australia’s red-hot market seems to be tapering, MarketWatch reported.
