Global Home Prices to See Declines or Lower Growth in 2023

December, 8, 2022

Fitch Ratings : Nominal home price growth will decline or slow substantially in 2023 in most countries, primarily as a result of cooling demand due to high mortgage rates and rising cost of living, Fitch Ratings says in its Global Housing and Mortgage Outlook. This will follow a period of price declines in the second half of 2022 in Australia, Canada, China, Denmark, Germany, the Netherlands, the UK and the US.

Home prices will remain above their pre-pandemic levels as housing supply constraints will limit price corrections in some markets, while demand will be sustained by household formation and strong household balance sheets in others.

Loan performance will deteriorate as macroeconomic headwinds intensify and inflation causes real incomes to erode. Housing markets where a sizeable proportion of mortgages are floating rate or short-term fixed, including Australia, Canada, Italy, Spain and the UK, are particularly vulnerable to rising rates. Arrears are not expected to approach levels seen during the global financial crisis due to higher levels of home equity, disciplined underwriting, tighter financial regulation, borrower support offered by lenders, and government schemes in some countries.

Downside risks are material. The ability of governments to navigate fiscal and monetary policy to avoid a deeper downturn and low consumer confidence are key to avoiding steep housing market declines. Risks of inflation remaining higher for longer, more severe rate increases than our forecasts, and wages falling further behind inflation could result in a considerably larger price correction.

‘Global Housing and Mortgage Outlook’ is available at fitchratings.com or by clicking the link above.