Chief executive Brian Hartzer used the bank’s annual report to dismiss claims from some commentators that Australian property is massively overvalued.
“There is no doubt housing prices are strong in some markets, but we do not subscribe to the view that we are in a bubble,” he said.
“That’s because we believe the economics of Australian housing are sound.
“We are seeing genuine demand for housing that has consistently exceeded supply from investors and owner occupiers. It is only recently that we have seen an increase in building activity to help match demand.”
Mr Hartzer stressed that there has been no easing in credit standards across the industry.
“By that I mean we continue to lend to those people who have the capacity to repay, and the standards by which we measure that capacity have not relaxed — in fact we tightened our lending criteria in a number of areas this year,” he said.
“So, overall, we see the housing market as rational, with sound fundamentals. Of course, that does not mean we will not see stress in selected pockets.”
Mr Hartzer said housing will always remain a local proposition and that Westpac will continue to monitor its exposures at a local area level – and sometimes a building-by-building level.
“In addition, we recognise that housing affordability continues to be an issue in the community,” he said. “Nevertheless we are not expecting a major housing downturn.”