CBA boss ‘increasingly concerned’ with rising property prices

The Commonwealth Bank of Australia’s chief executive Matt Comyn says he is increasingly concerned with rising house prices and household debt levels and has called for action to be taken sooner rather than later to stop the property market from overheating.

The Reserve Bank of Australia (RBA) cautioned this week the nation’s soaring property prices and spiralling household debt could become a risk to the nation’s financial system and the RBA is now constantly assessing whether to tighten commercial lending standards.

CBA chief executive Matt Comyn has called for early intervention to slow down the skyrocketing property market. Credit:Alex Ellinghausen

Mr Comyn, speaking during a hearing of the federal economics committee on Thursday, said the best form of regulation was self-regulation and pointed to the bank’s decision to increase its serviceability floor rate in June to 5.25 per cent, the highest of the big four banks.

Liberal MP Tim Wilson, who chairs the committee, asked whether the chief executive of the country’s largest mortgage lender was concerned about mortgage stress. Mr Comyn said historically low interest rates had ensured the bank’s lending portfolio was healthy.

“But if you were to ask that question slightly differently in terms of increasing housing debt and increasingly housing prices,” Mr Comyn said. “I would say we are increasingly concerned.”

Research firm CoreLogic has found house prices have climbed between 15.6 per cent and 26 per cent across Melbourne and Sydney over the 12 months to August. Mr Comyn said the housing market had been “resilient and robust” during this period, but he was concerned about the outlook as income growth is increasingly out of step with credit growth.

“We would all have a shared concern about making sure Australia’s households are in a strong position to continue to repay but also to support broader consumption in the economy in second half of this decade if interest rates are rising and if they were to rise more quickly,” Mr Comyn said.

The New Zealand government has hiked taxes for investment properties earlier this year in an effort to slow the runaway housing market, yet property values have continued to grow around 15 times faster than incomes over the first six months of this year. Mr Comyn pointed to NZ to encourage early intervention.

“It is much harder to act when the market is accelerating versus taking interventions to try to avoid too much of an acceleration,” he said. “We think it would be important to take some modest steps sooner rather than later to take some of the heat out of the housing market.

“I want to be clear, I’m not concerned about the point we are at today. But based on the acceleration, I think it would be prudent to act sooner rather than later.”

Australia’s latest housing rally was different to the 2015 so-called ‘housing bubble’ due to the swing from investor to owner-occupier borrowers, Mr Comyn said, but the disconnect between falling confidence during lockdowns and rising housing demand was concerning.

“In the significant period of lockdown in Sydney, Melbourne, we have seen big falls in consumer and business confidence, as you would expect,” he said. “What has surprised me … I’m not seeing much of a slowdown in terms of [mortgage] applications and funding. You can see the market is still very active.”

CBA launched, then extended, its moratorium on foreclosures for homeowners impacted by COVID-19, which is due to expire in February next year. Mr Comyn said once the moratorium was lifted, he expected CBA would have to force sell up to 2,000 properties. “We anticipate, at some point next year, there will be some very difficult personal circumstances particularly in owner occupied.”

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