Aus house prices to swell by 16%: Fitch

The ratings agency has raised its home price expectations for seven countries in 2021, with the largest revisions being for Canada and Australia. Both countries have been branded with double-digit price growth forecasts.

Low mortgage rates, extended pandemic support and faster economic rebounds are expected to drive a 14-16 per cent rise in Australia for 2021.

Lockdowns, border closures and working from home also resulted in higher savings, enabling buyers to save for home deposits earlier than expected.

Further, the cash rate being at its record low of 0.1 per cent and the RBA’s term funding facility has meant that “low-cost mortgage credit is readily available for most buyers”, Fitch noted.

“Low interest rates in Australia have also started to encourage housing investors into the market, potentially replacing demand from first-time buyers as they start to be priced out,” the report stated.

However, first home buyer support from the government has further incentivised purchases. Fitch noted that Australian Bureau of Statistics data showed first home buyers occupied around a quarter of overall lending in March, up from around 10 per cent four years ago.

The trend of remote and hybrid working has powered a movement away from capital cities, the report said. House prices had increased in almost all regions across Australia and three other countries monitored: Canada, the US, Ireland.

Canada was predicted to see a 10-15 per cent rise in 2021, while the US is expected to see 8 to 10 per cent growth, Ireland is expected to see a 4-6 per cent elevation, and a 6-10 per cent increase has been called for Denmark.

Fitch stated the spike in house prices could slow in the medium term if new supply rises to meet demand.

But supply constraints are expected to persist into next year, due to limited construction in Australia, where it has been limited since before the pandemic.

Fitch noted 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.

[Related: Active property listings log biggest YOY fall on record]