Australian house price growth to slow to 2 percent: Fitch Ratings

Australian house price growth to slow to 2 percent: Fitch Ratings
Australian house price growth to slow to 2 percent: Fitch Ratings
House prices are likely to rise only modestly across Asia-Pacific (APAC) in 2018, with regulatory tightening, rising interest rates and declining affordability acting as a drag in most markets, says Fitch Ratings in a new report. 

Monetary tightening in the next few years - globally and within the region - will gradually bring to an end the ideal conditions that have supported housing markets over much of the last decade.
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 Australian house price growth to slow to 2 percent: Fitch Ratings
However, tightening is unlikely to be enough to trigger a sharp correction during 2018, Fitch suggest.

Regulators have taken steps to contain price rises in most of APAC's major markets in recent years.
"There were signs of these steps gaining traction in 2017 in the main hotspots - Australia, New Zealand and China - where price growth slowed from the double- to single-digits.

"Several APAC markets will soon start to feel the impact of China's limits on overseas foreign-currency transfers.
"Australia and New Zealand have attracted particularly strong Chinese investment.
"Australia has placed its own limits on foreign, non-resident buyers, while we expect New Zealand to introduce restrictions this year.

"We forecast house-price growth across Australia's eight capital cities to slow to 2%, from 5% in 2017.
"Low interest rates and high population growth are likely to support prices, but rising supply, falling rental yields, tighter lending standards, foreign-ownership restrictions, and income growth lagging cost of living increases will dampen price gains.
"Moreover, stable economic performance and prudent underwriting standards are likely to help contain increases in arrears as mortgage rates rise.'

Fitch forecast arrears in most APAC markets to remain below 0.5%.
"The impact is likely to be slightly more pronounced in Australia and New Zealand as house-price growth stabilises, especially in big cities.
"Household debt is high in both countries and most mortgages have flexible rates, which leaves borrowers more exposed to faster-than-expected interest rate rises." 

There global report advised in New Zealand, strong population growth and sluggish housing construction - particularly in Auckland - are likely to result in continued supply shortages, despite regulatory tightening. We expect house-price growth to pick up, but only slightly, to 3.0%.

Fitch's Global Housing and Mortgage Outlook includes analysis of house prices, arrears and mortgage lending volumes for 22 countries, including Australia, China, Japan, Korea, New Zealand and Singapore in APAC.
National house prices are forecast to rise this year in 19 of 22 markets highlighted by Fitch Ratings in a new report, but growth is expected to slow in most markets and risks are growing as the prospect of gradually rising mortgage rates comes into view this year. 
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Australian house price growth to slow to 2 percent: Fitch Ratings
"Arrears are at very low levels in most markets. They will only move in one direction as mortgage rates rise slowly due to higher policy rates and more expensive bank funding from the gradual unwinding of quantitative easing. Floating-rate loans and borrowers refinancing to new rates will be first affected," said Suzanne Albers, Senior Director, Structured Finance, Fitch Ratings. 
"We expect home prices to stabilise in Sydney and Melbourne. However, if corrections are only limited after several years of very high growth, the risk of large price declines in future downturns remains," added Ms. Albers. 
Slowdown Price Growth

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