Falling house prices have not made homes more affordable, bank chiefs tell parliamentary inquiry

Executives from ANZ and Westpac told a parliamentary inquiry into Australia's four biggest banks on Thursday that falling prices have not made housing more affordable, and that more supply is the long-term problem.

Westpac chief executive Anthony Miller said the bank is lending to about 30 per cent fewer housing construction projects than up to 18 months ago. He put this mainly down to higher construction, labour and material costs rather than the federal changes to negative gearing and the capital gains tax discount. Builders constructed 5,300 apartments and townhouses this year, down from 8,000 last year, he said. He urged governments to fix planning and slow approvals.

ANZ chief executive Nuno Matos said ANZ expects home prices to fall about 13.5 per cent from peak to trough and stabilise in 2028. He said hardship affects about five in 1,000 ANZ customers, up about 10 per cent in six months, and arrears are expected to worsen before improving. ANZ loan applications fell 12 per cent over six months, with investor applications down 27 per cent.

Inquiry chair and Labor MP Ed Husic said a big four bank makes about $234 a week in profit from an average family with an average loan. Matos disputed the figures, saying mortgages are among the least profitable parts of banking. Liberal MP Simon Kennedy said affordability had worsened by 5.4 per cent in 12 months, according to the Housing Industry Association, even as prices fell.

Investor home loans fell 30.6 per cent in the year to September. Labor welcomed the faster retreat of investors than owner-occupiers and highlighted the share of investor lending going to new builds rising from 17 to 28 per cent between the March and September quarters. These are different measures from ANZ's six-month applications figures.

The budget's tax changes retained negative gearing for new builds to encourage construction. Miller said some improvement was evident but had not arrived as quickly or as strongly as hoped. Westpac's dollar lending for new housing construction was higher than a year earlier even while the number of projects was lower. Costlier labour and materials make affordable apartments and townhouses less attractive to developers than higher-end homes, he said.

Husic's calculation also put total bank profit from an average owner-occupier mortgage over 30 years at almost $300,000, up $40,000 since rates began increasing earlier in the year. Matos disputed the calculation and said mortgage profitability had declined over at least two decades. His defence was that banks were fulfilling their role, not taking advantage of borrowers' living-cost pressures.

Matos also warned about competing demands for capital from artificial intelligence, defence, energy and government budget deficits as interest rates rise. Kennedy linked his affordability criticism to an 8 per cent fall in housing prices and government spending at a 40-year high. These were the witnesses' and MPs' assessments at the hearing, not an agreed causal finding of the committee.

Miller said adding resources on the demand side alone would not fix the longer-term shortage. He called for an urgent break-glass response to planning and approvals, arguing that slow decisions hold back housing, energy targets and living standards. ANZ said owner-occupier applications were roughly flat while investor demand fell, another distinction from the national annual lending numbers.

Illustrative Melbourne residential buildings, not a specific bank-financed project.