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Negative gearing won't hurt short-term demand: National Australia Bank

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National Australia Bank is not anticipating a material impact on the business if negative gearing is abolished, its head of personal banking says.

Negative gearing, a tax concession for property investors, is one of the pivotal issues of the federal election campaign. Labor has proposed scrappingg it, in a move it says will make property more affordable, particularly to first home buyers.

Gavin Slater, NAB personal banking group executive, said, in the short term, the removal of the tax break was unlikely to affect its lending business.

NAB head of retail banking Gavin Slater says a shortage of housing is supporting property prices. Pat Scala

"We are going through a very low period of interest rates, from an affordability and investor point of view in a relative sense, compared to if it is high interest rates," he said at a media briefing. "It makes investor properties a little bit more affordable.

"Then, the other side of the equation, if you look at supply and demand, there's a shortage of housing so still reasonable yields are being generated from a rental market point of view to cover the obligation."

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But Mr Slater said the longer term effect was unknown.

But the bank remained cautious on lending to foreign residential property buyers, joining the major banks this month in a crackdown on lending to those who relied on foreign incomes.

"We've certainly had a different risk appetite, particularly as it relates to apartments, as opposed to resident lending to established residential properties," Mr Slater said.

"More recently, we've tightened our lending criteria again, 40 per cent shading of income and a 60 per cent loan-to-value ratio on that. We think it's a part of the market that requires a suitable amount of caution."

Mr Slater said competition in the mortgage market remained most fierce in the owner-occupier space, and a high proportion of customers were shopping around to get the best deal, particularly in light of the Reserve Bank of Australia cutting interest rates this month to a fresh low of 1.75 per cent.

"While price is very important, it's not the most important thing," he said. "What we focus on with our customers is the broader value of the relationship."

NAB is in the process of rolling out its personal banking origination platform across its branches as it aims to move to the forefront of digital banking. The platform allows customers to lodge and receive loans online, and can process credit cards in as little as seven minutes.

Vanessa Desloires writes on markets from our Melbourne newsroom. Connect with Vanessa on Twitter.

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