Wednesday 7 December 2016

Stalled incomes and over-building spook Australian lender

Jamie Freed

Published 01/12/2016 | 02:30

Shayne Elliott, ceo of Australia and New Zealand Banking Group
Shayne Elliott, ceo of Australia and New Zealand Banking Group

Australia and New Zealand Banking Group has become more cautious about lending to apartment developers and buyers due to concerns that parts of the market are oversupplied and household incomes have stagnated.

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Shayne Elliott, CEO of Australia's third-largest bank by market value, told Reuters in an interview the bank had gone "quiet" in funding new developments in Melbourne's central business district and that there had been overbuilding in Brisbane.

"The second thing is to actually provide mortgages for people who are going to buy those apartments... again we haven't really been aggressive in that sector," he said.

The news will have uncomfortable echoes for Irish people who set up home in Australia after the property crash.

Approvals to build new Australian homes sank a shocking 12.6pc in October from a month earlier, confounding forecasts of a 1.5pc rise and marking the biggest drop since mid-2012.

Asked about overall market conditions, Elliott said: "It doesn't mean it's a calamity or a disaster but it does mean we should be cautious."

He said it wasn't clear if a potential decline in values for small inner-city units being built in Sydney, Melbourne and Brisbane and often favoured by foreign buyers would have a contagion effect on other sections of the market.

ANZ could cope with property price falls of up to 40pc and a near-doubling of unemployment - the worst case scenario it runs as part of its stress-testing.

"It doesn't mean profitability would stay but in terms of soundness and survival, capital ratios, the ability to lend look okay," he said.

Elliott also said he was concerned that wage growth in Australia had stagnated. At a Reuters Newsmaker event earlier in the day, he cited the example of a Western Australian worker who was paid A$200,000 (€140,000) a year during the resources boom but had his wages cut to A$80,000 (€56,000) after the rout in commodity prices. (Reuters)

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