Tuesday, January 23, 2018 /9:50AM /Fitch
house prices are forecast to rise this year in 19 of 22 markets highlighted by
Fitch Ratings in a new report, but growth is expected to slow in most markets
and risks are growing as the prospect of gradually rising mortgage rates comes
into view this year.
are at very low levels in most markets. They will only move in one direction as
mortgage rates rise slowly due to higher policy rates and more expensive bank
funding from the gradual unwinding of quantitative easing. Floating-rate loans
and borrowers refinancing to new rates will be first affected," said
Suzanne Albers, Senior Director, Structured Finance, Fitch Ratings.
fixed-rate loans are less exposed to increasing rates, but fewer re-financings
mean lower lending volumes, so lenders may face pressure to relax their
origination standards, subject to regulatory limits.
Greece and the UK are the only countries not expected to see price rises this
year, but Fitch notes that national trends can mask large performance
variations within countries with some regions continuing to see unsustainable
price rises while others stagnate or even fall.
expect home prices to stabilise in Sydney and Melbourne and show modest
declines in Oslo, Toronto and London. However, if corrections are only limited
after several years of very high growth, the risk of large price declines in
future downturns remains," added Ms. Albers.
these challenges, six of the 22 housing markets covered by the report have seen
upward revisions to their outlooks over the past 12 months compared with three
being revised down, leaving just three, the UK, Canada and Norway, in
has a positive or stable/positive market outlook for seven of the nine eurozone
countries in this report due to expectations for strong economic growth and
continued quantitative easing (QE) in 2018. As the unwinding of QE and
normalisation of interest rates is only expected in the medium-term, so the
highlighted challenges are likely to materialise later than in other regions.
believes that in 2018 a combination of factors will be needed to constrain
house price rises that have gone beyond market fundamentals and are primarily
due to buyers' expectations for further growth. Overheated markets slowed in
2017 when a combination of factors pressured prices, including lending
limitations along with more local factors such as heightened supply and falling
immigration in Oslo, multi-layered regulatory controls on home purchases and
mortgage lending in China and for London, Brexit uncertainty plus the impact of
buy-to-let (BTL) changes including lower tax deductibility of rental income.
lenders (NBL) in the US, which tend to have more flexible credit standards, are
six of the top 10 lenders by volume. In the UK, NBL have focussed on BTL
lending where they have not yet been bound by stricter Prudential Regulation
Authority guidelines that apply to deposit-taking institutions. NBL (especially
government agencies) could also increase competition in Mexico as they move
from index-linked lending to peso loans, the traditional market for banks.
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