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Average US home prices were expected to rise 5.4 per cent in 2024, 3.3 per cent next year and 3.4 per cent in 2026 | Photo: Shutterstock
House prices in most key markets will rise modestly this year and next on expectations mortgage rates will fall further and help to marginally improve affordability of expensive property, a Reuters poll of analysts showed.
Most central banks were expected to start cutting interest rates sometime this year, or have already done so, with the US Federal Reserve predicted to start at its Sept. 17-18 meeting.
That is providing housing prices in developed countries, contending with low supply of property that is affordable to most new homebuyers, impetus to climb modestly higher.
The Reuters poll of nearly 150 housing analysts taken Aug. 19-Sept. 3 covering the US, Britain, Germany, Canada, Australia, New Zealand, China, Dubai and India showed average home prices in almost all of these markets will rise this year and next.
But compared with recent episodes of expected central bank policy easing, the forecast price rises are tame.
While median predictions showed the change in average home prices in 2024 to vary between markets from a modest 1.4 per cent decline to a rise of around 8 per cent, the overall outlook was positive with analysts upgrading their outlook for five of nine housing markets surveyed from three months ago.
“Falling mortgage rates across many markets will strengthen the position of aspiring home purchasers, but only modestly, with affordability pressures already at breaking point,” said Matthew McAuley, global property sectors research director at JLL.
“Increasingly large proportions of the populations of countries such as the US, Canada, Britain, France, Germany, Australia and Japan will rely on income-driven housing models to satisfy their housing needs.”
A near-80 per cent majority of analysts, 82 of 106, who answered an additional question said affordability will improve for first-time homebuyers over the coming year. The remaining 24 said it would worsen.
But with supply still tight in most countries, many aspiring new home buyers are likely to remain renters in coming years, and pay even more to rent.
Urban home rents were expected to outpace consumer inflation over the coming 12 months in all the countries that were surveyed, according to median predictions from analysts who answered a separate question.
“In a higher interest rate environment, prime rents are continuing to outperform capital values… Low levels of stock in many locations and higher numbers of would-be buyers are driving the trend in many prime rental markets,” said Justin Marking, head of global residential at Savills.
Average US home prices were expected to rise 5.4 per cent in 2024, 3.3 per cent next year and 3.4 per cent in 2026.
Much of that price appreciation has to do with homeowners who have locked in low 30-year mortgage rates, most under 5 per cent and some even below 3 per cent, and who are unwilling to part ways with their homes on such cheap deals.
While the Fed is widely expected to start cutting rates in September and by a total of 75 bps by year-end, a lack of adequate supply is already underpinning a market where average house prices are well above their pandemic-era peak.
Average home prices in Australia were forecast to rise more than 6 per cent this year, again on tight supply, bringing average prices above their pandemic peak too.
“It is worth noting though, that we don’t anticipate a material improvement in affordability, with the unaffordability of houses likely to be structurally higher than prior to the pandemic over the short-to-medium term,” said Johnathan McMenamin, senior economist at Barrenjoey.
In neighboring New Zealand, where prices surged over 40 per cent during the Covid-19 pandemic, they were expected to rise only 1 per cent.
In India, demand for luxury properties from cash-rich individuals was expected to drive house prices even higher over the next couple of years. Despite demand coming from a wealthy few in a country of 1.4 billion, that translates into a sizeable market, enough to push average home prices up by around 8 per cent this year and 6 per cent next.
The battered German housing market, where house prices plunged 7.2 per cent last year, was expected to stabilise in the coming months with a 1.4 per cent fall this year, followed by a 2 per cent rise in 2025.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First Published: Sep 04 2024 | 7:19 AM IST
