Don’t blame overseas investors, says major bank

Speaking at the Australian Securitisation annual conference last week, NAB’s director of asset transformation, Ken Hanton, said foreign investor demand has fallen while participation by domestic investors has increased significantly over the last quarter.

While he admitted that one quarter doesn’t make a trend, Mr Hanton highlighted the incorrect assumptions of some.

“You have almost three times the amount of domestic interest than overseas, so we whip ourselves into a frenzy that the offshore bid is pushing up prices and that is creating a bit of a bubble,” he said.

“It’s actually happening from the domestic investors.”

A combination of record-low interest rates, two years of house price growth and an expectation among local investors that prices will continue to rise continues to fuel domestic demand, Mr Hanton said.

“In terms of whether or not it is creating a housing bubble, I look at the domestic investor as opposed to the offshore investor,” he said.

Mr Hanton added that it is “absolutely mandatory” that lenders keep their standards high enough to avoid getting into a “bubble-like situation”.

“One of the biggest things from the US sub-prime crises that we have all learnt is as soon as you start dropping your lending standards, you get credit growth, you get an excess of supply and it eventually ends in tears,” he said.

“Lending standards are a discipline that we all as a lending community need to adhere to.”