Westpac chair plays down risks of Aussie apartment 'bubble'

Westpac chairman Lindsay Maxsted downplayed concerns that the impending surge in Australian inner-city apartment supply, telling investors he believed there was not a “speculative bubble”, Fairfax media reported.

Maxted told shareholders at the bank's annual general meeting in Adelaide that areas that had 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.

Fairfax said a key risk identified by regulators in recent months had been the surge in inner-city apartment construction, and the impact on housing markets when new supply is completed.

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.

"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," Maxsted said.

"Rest assured, this bank has been watching city apartments very closely for many, many years. 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."