17-02-2017, 07:57 PM
Housing prices to come off the boil in 2017, says Fitch
The Australian
February 17, 2017
DANIEL PALMER
Ratings agency Fitch has detailed forecasts for a 3 to 5 per cent price appreciation in the local property market this year as part of a broader global review of the real estate market.
In its update, the agency said 2016’s “unsustainable” price appreciation of 10.9 per cent would not be repeated, although first home buyers would still struggle to find a way onto the property ladder given continued price growth.
“Record low interest rates have helped support price growth while rents remained flat. But tighter lending standards, including limitations on the growth of investment loan portfolios for authorised deposit-taking institutions, have dampened price dynamics,” Fitch said.
“Fitch expects moderate growth in Sydney and Melbourne property prices in 2017, propped up by low interest rates and population growth.”
National price growth of 3 to 5 per cent is expected, while the regional market may again underperform against the capital cities, particularly Sydney and Melbourne.
“Lower growth in regional residential property prices of around 0-5 per cent [is expected], due to falling rental yield pressure, increasing supply and fewer prospects for capital growth for investors,” the agency added.
“Fitch expects dwelling completions, to continue to rise nationwide and peak in 2017, acting as a dampener on prices.”
Wage growth has lagged price appreciation for the better part of two decades, with the gap swelling since the end of the GFC.
This dynamic is not expected to be resolved this year, with wages to still undershoot even if the gap is likely to close.
In response, first home buyers are finding it increasingly hard to find an entry point to the property market, an issue that will be remain a point of contention for 2017.
“Fitch expects first-home buyers to continue to struggle in 2017, as demand for housing remains strong,” the report said.
“Low income growth, tighter underwriting and rising living costs maintain pressure on affordability, even as low rates persist.”
The ratings agencies have long warned on the heavy exposure of the big banks to the mortgage market, with Fitch again noting high household debt would weigh on mortgage serviceability.
However, 2017 is expected to see stable arrears rates given persistently low interest rates.
Mortgage lending is projected to rise broadly in line with prices, with 5 per cent expansion tipped for 2017, as against 10 per cent last year.
As part of its global report, the ratings agency noted the prospect for rapid growth in several markets and stable conditions or better in 19 of the 22 markets measured.
However, a slowdown was “overdue” for some of the hotter markets, such as Australia.
“The rate of price increases should slow as home purchases become increasingly expensive relative to household income and rents,” Fitch added.
“Unsustainably rapid price rises in some countries (eg New Zealand, Norway, Australia, Canada) are expected to moderate in 2017.”
http://www.theaustralian.com.au/business...826abc07bb
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The Australian
February 17, 2017
DANIEL PALMER
Ratings agency Fitch has detailed forecasts for a 3 to 5 per cent price appreciation in the local property market this year as part of a broader global review of the real estate market.
In its update, the agency said 2016’s “unsustainable” price appreciation of 10.9 per cent would not be repeated, although first home buyers would still struggle to find a way onto the property ladder given continued price growth.
“Record low interest rates have helped support price growth while rents remained flat. But tighter lending standards, including limitations on the growth of investment loan portfolios for authorised deposit-taking institutions, have dampened price dynamics,” Fitch said.
“Fitch expects moderate growth in Sydney and Melbourne property prices in 2017, propped up by low interest rates and population growth.”
National price growth of 3 to 5 per cent is expected, while the regional market may again underperform against the capital cities, particularly Sydney and Melbourne.
“Lower growth in regional residential property prices of around 0-5 per cent [is expected], due to falling rental yield pressure, increasing supply and fewer prospects for capital growth for investors,” the agency added.
“Fitch expects dwelling completions, to continue to rise nationwide and peak in 2017, acting as a dampener on prices.”
Wage growth has lagged price appreciation for the better part of two decades, with the gap swelling since the end of the GFC.
This dynamic is not expected to be resolved this year, with wages to still undershoot even if the gap is likely to close.
In response, first home buyers are finding it increasingly hard to find an entry point to the property market, an issue that will be remain a point of contention for 2017.
“Fitch expects first-home buyers to continue to struggle in 2017, as demand for housing remains strong,” the report said.
“Low income growth, tighter underwriting and rising living costs maintain pressure on affordability, even as low rates persist.”
The ratings agencies have long warned on the heavy exposure of the big banks to the mortgage market, with Fitch again noting high household debt would weigh on mortgage serviceability.
However, 2017 is expected to see stable arrears rates given persistently low interest rates.
Mortgage lending is projected to rise broadly in line with prices, with 5 per cent expansion tipped for 2017, as against 10 per cent last year.
As part of its global report, the ratings agency noted the prospect for rapid growth in several markets and stable conditions or better in 19 of the 22 markets measured.
However, a slowdown was “overdue” for some of the hotter markets, such as Australia.
“The rate of price increases should slow as home purchases become increasingly expensive relative to household income and rents,” Fitch added.
“Unsustainably rapid price rises in some countries (eg New Zealand, Norway, Australia, Canada) are expected to moderate in 2017.”
http://www.theaustralian.com.au/business...826abc07bb
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