Australian house prices to expand by 16%, ratings agency says

This is much higher than the agency’s previous prediction of 3 to 5 per cent growth this year, released in December 2020. 

According to Fitch, lockdowns, border closures and working from home resulted in high savings in 2020, enabling purchasers to save home deposits earlier than expected.

“Incomes remained resilient for many home owners and buyers,” the agency’s report reads.

And while first-time buyers start to be priced out, housing investors are returning, encouraged by the low interest rates, the ratings agency noted.

The return of investors and a persistence of supply constraints at least into next year, due to limited construction, are expected to keep pushing prices north.

“The cost of building materials has also risen in 2021, pushing up construction costs, which will be passed on to buyers through higher asking prices for future new builds,” Fitch explained.

As for the agency’s policy rates forecast, Fitch flagged an increase in Australia in 2023. This, it believes, could create further obstacles to first-time buyers entering the market.

But before rates do move, Fitch expects the government to implement measures to cool the market.

Just last week, economists at ANZ said they expect that the Australian Prudential Regulation Authority (APRA) and the Reserve Bank of Australia (RBA) will move to cool the housing market this year.

Their forecasts now assume that price growth in Australia’s housing market will slow as ‘hard’ macro-prudential policy is implemented before the end of 2021.

Elsewhere, Fitch foresees a boost in Canadian property prices, noting a 10 to 15 per cent jump is highly likely. This follows previous predictions of a 5 per cent contraction.

The US market too is expected to flourish, with growth tipped to hit 10 per cent, much like Denmark where year-to-date growth has surpassed 3 per cent.