The NAB share price is falling slightly today after its Chair, Phil Chronican, said credit limitations would be a “rational” response to curb the booming housing market.
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The 澳大利亚国家银行 (ASX: NAB) share price is falling slightly today. This comes after its chair, Phil Chronican, said credit limitations would be a “rational” response to curb the booming housing market.
Limiting Australia’s housing boom
Record-low interest rates have led to a surge in Australian house prices. Currently, prices in Australia’s capital cities are rising at their fastest rate in 32 years.
Chronican said this was the expected result of the reserve bank’s cash-rate policy. Additionally, he stated that the government could focus on macroprudential policies instead. Chronican believes this could curb the housing boom without losing the positive effects of a low rate.
Macroprudential policies are centralised regulatory controls in the financial market. They are aimed at identifying and reducing systemic risks. In this case, Chronican believes such policies would be focused on limiting borrowing and credit lending amounts.
According to the Sydney Morning Herald, Chronican told a Governance Institute lunch in Sydney:
We are running an extraordinarily accommodating monetary policy with interest rates at levels that none of us can remember, because they are completely unprecedented.
We shouldn’t be surprised that that’s going to show up in price inflation in some form or another. At the moment, we’re seeing that in asset price inflation, and it’s not just real estate, we’ve seen financial assets as well.
Chronican highlighted the use of governmental credit regulation in two of Australia’s close Asian neighbours as an example of effective use of these policies. NAB forecasts Australian house prices to rise by 10% over the next 12 months.
There are plenty of economies, particularly in economies like Singapore and New Zealand, where macroprudential policies have been brought in for short periods of time to take the heat out of the market. And if that happens, then as I said, that would be understandable.
And I just point out that we’re seeing this strong house price growth at a time when Australia’s population growth is at record lows. You can imagine what the pressure is going to be like as migration is reopened in the coming years.
NAB share price snapshot
Founded in 1982, NAB is among the largest listed companies on the ASX. It is also one of the big four Australian banks in terms of market capitalisation, earnings, and customers. In addition, it is the 21st largest bank in the world by market capitalisation.
At the time of writing, the NAB share price is down 0.41% to $26.58, but has performed well in 2021 so far, up 17%.
This far exceeds the growth of the Commonwealth Bank (ASX: CBA) share price, which has gained 7%. However, it is still below both ANZ (ASX: ANZ) share price gains of 23% and runaway leader Westpac (ASX: WBC), which is up 30%.
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Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.