Fitch Ratings see no Australian house price recovery until 2020

Fitch Ratings has predicted Australian house prices will fall by a further five per cent in 2019, driven by reduced affordability and restricted credit access.

“Australian borrowers continue to be vulnerable to financial shocks,” Fitch analyst Ben McCarthy said.

The ratings agency said it expected prices to stabilise in 2020. 

The drop in house prices in Australia this year will be the worst in the world, one of the world’s major credit rating agencies predicted.

The Fitch Ratings report released on Wednesday predicted Australia’s housing industry would be the worst performer out of 24 countries for the second year running. 

Prices have already dropped by 6.7 per cent since their peak and Fitch said this was mostly due to lower investor demand thanks to tougher restrictions on lending. 

Fitch noted that high household debt made economies more vulnerable to shocks in the financial sector and borrowers more exposed to downturns given very high household debt level.

It was calculated as the highest in the report relative to GDP at about 120 per cent.

Fitch predicts house prices will stabilise by 2020 due to above-trend GDP growth and strong net migration.

In Sydney and Melbourne, where larger peak-to-trough falls of 11.1 per cent and 7.2 per cent have occurred, Fitch expects price declines to continue at a similar pace.

It notes that the most expensive properties have experienced the largest declines of 9.5 per cent.

Fitch has also warned Australians could struggle to keep up with their mortgage payments as house prices fall and it takes longer to sell a property.