An interesting convergence of stories today about the National Australia Bank’s thoughts on Australian housing.
The AFR reports that NAB’s head of retail banking, Gavin Slater, told a UBS Financial Services conference that average house price growth will drop back to 2-3% per annum and that:
The fundamentals are as good as they get. We don’t believe we have a housing bubble, but our outlook is that increasing house prices will be more modest than they have been in recent times.
That is an important admission as it suggests that a lot of the recent price rises were genuinely a simple reflection of pent-up demand and growth will now moderate back to an inflation-based rise in the years ahead.
That’s good news for economic stability.
No bubble also means less risk of a major downturn in the Australian housing market which might help explain why the NAB is gearing up for an assault on the home loan market with an increase in the commission it pays to brokers.
Brokers are an important channel for lenders to originate home loans and the AFR reports the NAB will be increasing the cash it pays brokers to 0.15% in the first year of a loan – up from zero currently.
The NAB’s move mirrors moves by other big lenders, including Westpac and the Commonwealth Bank, as the banks fight for a share of what is still a slow growth market.
Low growth in house prices is likely to mean less growth in demand for home loans, which is also likely to lead to a further intensification of competition in the home loan market.
That is potentially very good news for consumers, as more competition should mean some great deals.