NAB boss Andrew Irvine calls for radical rethink on property amid housing crisis

Bank CEO Andrew Irvine says governments should ‘take friction’ out of the planning process for new homes and urged innovation in residential design to suit modern family sizes.

National Australia Bank chief Andrew Irvine has urged a radical rethink of property and land taxes, planning processes and the types of dwellings being built, as the nation’s policymakers seek to address an acute housing shortage and affordability issues.

His comments come after the Senate this week voted for a new inquiry to assess home ownership and delve into how to help first home buyers into the market. It will look at lending practices by banks and private credit firms, and the potential for deregulation.

Mr Irvine told The Weekend Australian state and federal governments should work to “take friction” out of the planning process for new homes and apartments, while also shortening time frames for rezoning land and getting development approvals.

Mr Irvine noted developers were facing a string of challenges, including higher building costs, red tape and punitive taxes in some states.

“I had lunch last week with a number of our customers, and there were thousands upon thousands of dwellings in that room … those developers, had planning approval, and they’re not starting construction because the math doesn’t work,” Mr Irvine said, in a trip that included separately visiting bank customers in the Northern Territory late this week.

“In Victoria, taxation is a real problem. Some of our developer clients in Victoria would say something like 40 to 45 per cent of the cost of a dwelling is tax, which is just completely untenable.

“If we could have some help on taxes, I think you’d see more shovels in the ground and more housing starts.”

Mr Irvine also said the average size of a household had halved since the 1970s to about 2.4 people today, which should trigger debate about the types of homes now being built.

“We’re not innovating enough in terms of design, modular, new construction methods and also the types of houses,” he added. “We’re building the wrong properties. We need to have more innovation, smaller properties that fit the needs of, you know, smaller households, younger people not living with big families anymore.”

His comments came as NAB unveiled a lower $1.77bn cash profit for its third quarter, and warned it was seeing higher impaired loans in its lending book.

The lender’s earnings fell 6 per cent in the three months ended June 30, from its $1.9bn cash profit reported in the same period a year earlier, disappointing analysts.

NAB CEO Andrew Irvine, second from right, in Alice Springs this week with traditional land owners and NAB customers Steven Benedict and Kristy Bloomfield and NAB head of First Nations Affairs Eveanne Liddle, right.

Despite this NAB shares climbed 1.5 per cent or 54c to close at $36.48 on Friday.

Mr Irvine said he was, however, seeing less pressure on net interest margins in the home loan market as competition receded and with inflation remaining sticky, rate cuts were not on his radar until 2025.

“Goods inflation is already in a good place, but it’s services inflation that’s proving sticky and concerning the Reserve Bank,” he added. “That’s the big driver. The second one would be employment. And if we start to see unemployment rising.

“It’s (rate cuts) dependent on what happens to inflation. You know, we could be wrong on May (2025 for a first rate cut) it may be a touch earlier, but I don’t think you’ll see it this year.”

NAB’s quarterly update flagged a deterioration in loan quality and losses in its portfolio as it booked a $118m credit impairment charge. That followed a $363m impairment charge booked at the first half.

“We’re seeing a slow and steady increase in arrears,” Mr Irvine said. “While building they are below our expectations for where they would be at this stage of the cycle.”

Mr Irvine noted the majority of home loan customers were prioritising mortgage payments.

“But it’s taking a bigger portion of the household income, and therefore (they are) pulling back and budgeting on other things,” he said.

NAB noted that individually assessed charges remained at low levels. The bank is, however, thought to have an exposure to Victorian regional brewery Billson’s Beverages, which fell into administration last month.

NAB’s collective provisions were up 4 basis points to 1.51 per cent of gross loans.

Non-performing exposures to gross loans were up 11 basis points from March 2024 to 1.31 per cent, with NAB noting that largely reflected “continued broadbased deterioration in the Business & Private Banking business lending portfolio, combined with higher arrears for the Australian mortgage portfolio”. NAB’s overall lending was up 1 per cent over the June quarter, buoyed by a rise in small business lending.

Mirroring Commonwealth Bank’s results on Wednesday, NAB’s net interest margin was stable in the quarter.

Mr Irvine said competitive activity in the home loan market had become “a bit more sensible” in recent months.

“Our front book home loans that we’re writing are now above cost of capital, which they were not say six months ago … that’s a good sign,” he said. “It’s still very competitive, and customers still are looking around, given cost of living to ensure they’re getting good, competitive rates, but I think the market has moderated.”

But the bank booked an overall decline in underlying profits in the period of 2 per cent. On a statutory basis, NAB delivered an unaudited $1.9bn profit for the quarter.

Revenue fell 1 per cent across the group compared to the bank’s first half, with only the markets and treasury business seeing an earnings lift.

NAB’s net interest margin was stable in the period, with small reductions in lending competition and deposit mix offset by the benefits of a higher rate environment.

Expenses were up 1 per cent in the quarter against the bank’s first half result due to higher wages, partly offset by productivity benefits.

E&P banks research executive director Azib Khan said NAB had shown better than expected lending margins, noting the bank was now sharpening its home loan pricing “over the last month to deal with mortgage market loss.

“There may be some NIM pressure to come from this over the next six months,” he said.

“The element of increasing concern is asset quality. Despite the bad debt charge being lower than expected, there continues to be broadbased deterioration in the business lending portfolio.”

Mr Irvine said the bank’s capital “remained strong” over the quarter, which supported the continuation of its on-market share buyback.

The bank expects to complete the remainder of the $3bn buyback by May next year.

NAB’s common equity tier 1 capital, a key measure of the bank’s financial health, was 12.6 per cent, above NAB’s 11.5 per cent target.