Westpac chairman Lindsay Maxsted is hosing down concerns about the looming surge in apartments on the market, signalling the country's second-largest bank firmly believes there is no "speculative bubble" in inner-city units.
While other lenders including ANZ Bank and Bank of Queensland have in recent weeks highlighted what they see as a looming oversupply, Mr Maxsted on Friday played down any risk to the bank he chairs.
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At its annual general meeting in Adelaide, Westpac told shareholders areas that have been struggling economically were likely to face more financial stress in the year ahead, though this would not translate into a broader slide in credit quality.
A key risk identified by regulators in recent months has been the surge in inner-city apartment construction, and the impact on housing markets when new supply is completed.
![Westpac chairman Lindsay Maxsted: "We don't think there's a speculative bubble."](/web/20161211151602im_/http://www.theage.com.au/content/dam/images/g/k/7/1/s/b/image.related.articleLeadwide.620x349.gt7dhc.png/1481259277968.jpg)
Over the next two years, builders will complete 16,000 units in Melbourne, 12,000 in Brisbane, and 10,000 in Sydney, according to Reserve Bank predictions.
But Mr Maxstead said Westpac had been watching this part of the market since about 2012, particularly Melbourne and Brisbane, taking a cautious approach to property developer lending.
"City apartments get a lot of publicity. The price of housing in this country gets a lot of publicity, rightly so, as does the bank funding of that sector," Mr Maxsted said.
"Rest assured, this bank has been watching city apartments very closely for many, many years."
![Westpac CEO Brian Hartzer says Australia's economic growth would be improved by increased state and federal government ...](/web/20161211151602im_/http://www.theage.com.au/content/dam/images/g/t/7/c/a/a/image.related.articleLeadwide.620x349.gt7dhc.png/1481259277968.jpg)
"We don't think there's a speculative bubble in there, but we watch it very closely, and we are selective as to which developers we bank."
Bigger deposits
Westpac holds $13 billion in mortgages for inner-city apartments, of a total domestic housing portfolio of more than $400 billion. The bank has been tightening its underwriting standards by requiring customers to stump up a bigger deposits, and all lenders have cracked down on lending to customers with foreign incomes.
The comments came after an annual general meeting at which Westpac easily avoided a historic first strike from shareholders over its executive pay - unlike its rival Commonwealth Bank, which copped a vote of 51 per cent against its remuneration report last month
For Westpac, only 4.5 per cent of proxy votes were cast against the remuneration report, which said chief executive Brian Hartzer was paid $6.7 million last financial year.
In the meeting, Mr Maxsted faced repeated questions over the bank's climate change policies, with critics questioning how it had changed lending practices in accordance with its support for limiting global warming to no more than two degrees.
Mr Maxsted responded by saying trends in the banks' lending to heavy carbon emitters needed to be seen over a long-term time frame.
Earlier, Mr Hartzer reiterated his call for federal and state governments to respond to uncertain global growth by boosting the Australian economy through increased infrastructure spending.
"Our experience shows that where governments invest in infrastructure projects, business investment - and particularly small business investment - soon follows," Mr Hartzer said.
"In other words, infrastructure investments have a multiplier effect on economic growth."
Mr Hartzer said that guaranteed long-term investment would give businesses the confidence to spend, which in turn would lead to broad economic benefits.
"With interest rates near all-time lows, we believe there is a strong argument for governments to borrow to fund projects that expand economic capacity," Mr Hartzer said in his speech to shareholders.
Westpac economists still believe the Reserve Bank will keep the cash rate on hold for an extended period, but the election of Donald Trump in the US has raised expectations of higher US inflation.
Mr Hartzer said those inflationary expectations were flowing through to higher interest rates both in the US and domestically.
with AAP
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