Housing slump risk to economy has passed, says CBA’s Matt Comyn

CBA CEO Matt Comyn says a sharp decline in the housing market is no longer a near-term risk to the economy, with prices set to grow in 2021.

CBA CEO Matt Comyn has expressed confidence in the outlook for the housing market and the domestic economy.

Commonwealth Bank chief executive Matt Comyn has declared a sharp decline in the housing market is no longer a near-term risk to the economy, given the sector is holding up well and loan applications are strong.

CBA, the nation’s biggest home loan lender, has become more positive on the residential housing sector as increased signs emerge of the domestic economy recovering better than expected from COVID-19 and its first recession in almost three decades.

Mr Comyn said his optimism was due to rebounding consumer and business confidence and about $100bn in “surplus savings” across the economy.

“If the borders can stay open I think there is a lot of pent-up demand for big expansion around … domestic tourism, which will clearly be a positive,” Mr Comyn told a virtual conference on Wednesday.

“I don’t think the housing market is a risk any more. We have substantially upgraded our forecasts in and around housing versus where we were in May and even in August.

“The applications that we are seeing, and I saw the ABS data recently, they are extremely strong.”

CBA sees the potential for the housing market to accelerate into 2021 and 2022, with its base case now for 5 per cent price growth next calendar year which would vary across cities and houses and apartments.

Mr Comyn also said the huge amount that Australians had amassed in savings would provide the economy “quite a significant tailwind” when consumers started to step up their spending.

“The economic trajectory looks reasonable,” he added.

Mr Comyn’s comments follow those of two of the nation’s largest mortgage brokers — including CBA-owned Aussie — reporting a surge in loan applications.

Aussie CEO James Symond said while the property market had been unsettled in 2020 due to COVID-19, positive momentum was returning and the broking group posted a record October.

The boss of ASX-listed broking firm AFG, David Bailey, said his firm’s loan application volumes were up about 15 per cent on last year.

Mr Comyn noted that demand from investors in housing remained soft, although that would likely recover given prices were holding up,

“Investor is basically zero growth at the moment, it’s predominantly led (by) owner-occupier, first-home buyer and there’s some very significant incentives in place,” he said.

“I think increasingly investors will come back into the market, because there’s greater certainty around capital protection and capital growth and that tends to be the biggest driver of investors.”

Mr Comyn poured cold water on the risk of a bubble emerging in the housing market if prices got out of hand, but said if it came to that prior policies introduced by the banking regulator had been “very effective” at cooling the market.

He also noted that in NZ, where house prices had climbed 12 per cent since the start of COVID-19, they had started reintroducing some controls around lending.

Australian Prudential Regulation Authority chairman Wayne Byres said he didn’t believe any such policies were required in this market, given there was no evidence of lax lending standards.

Mr Comyn did caution that a key test for the banks and the economy would be between March and June 30, as government COVID-19 support measures and loan repayment deferrals rolled off.

He said a “high degree of uncertainty” remained about 2021.

While most Australian states and territories had agreed to re-open borders ahead of Christmas, a new spike in COVID-19 infections in South Australia this week prompted a short-term lockdown and renewed health concerns.

Banks are still working through mortgage and business loan repayment pauses, ahead of favourable capital treatment for those loans ending on March 31.

The Australian Banking Association on Wednesday said the number of loans still on deferral in early November was almost 70 per cent lower than the COVID-19 peak. That was across the nation’s seven largest banks.

APRA data shows there were loans totalling $179bn subject to repayment pauses as at September 30, including $133bn in mortgages and $35bn in small and medium business loans.

Several of the big banks have improved their views on the housing market.

ANZ this week upgraded its outlook and tipped a 9 per cent price rise in 2021 for housing.

On calls by ANZ CEO Shayne Elliott for the federal bank tax to be reviewed, Mr Comyn said he didn’t expect the levy would be reduced.

Treasurer Josh Frydenberg on Wednesday ruled out changing the tax. “There are no plans to do that,” he said.

The government imposed a levy on the big four banks and Macquarie in mid-2017. It was a tax of 0.06 per cent applied to the liabilities of banks meeting certain size criteria.