Fitch Ratings forecasts that Australian property will be among the hardest hit by COVID-19 in 2020, with values predicted to decline by 5% to 10% this calendar year:
Nominal home prices will fall in the UK, Spain and Australia in the rest of 2020 due to the impact of the coronavirus pandemic…
Under Fitch’s new baseline forecasts, Spain suffers the most significant fall in house prices, decreasing by 8%-12% in full-year 2020. Australian prices will decline by 5%-10%, whereas the UK will experience a decline of 3%-7% assuming the avoidance of a “cliff-edge” Brexit at the end of this year.
All six markets are suffering from contracting economies and deteriorating labour-market conditions due to the pandemic. Our home price forecasts consider how far this is mitigated or magnified by country-specific factors including policy responses, supply constraints, immigration and contrasting home price trends entering the pandemic…
Extremely low immigration and fewer foreign students this year will reduce Australian home prices, which were only recently recovering from a downturn…
Australia faces the challenge of almost no immigration expected for the rest of the year. High immigration has been a large driver of its home price growth in the past decade. Sydney and Melbourne will also lack the large numbers of foreign students they usually receive each year…
Lenders in Australia have confirmed that they have started checking if the borrower has received government support payments, requesting employer confirmation that the borrower is working the same hours as before the pandemic or to see their most recent salary payment, and reducing the maximum LTV ratios for high-density apartments in central business districts. These properties face the most downward price pressure from the pandemic…
Under our baseline scenario, we forecast home prices to largely stabilise in the UK and Spain with a higher possibility of muted growth in Australia in 2021…
In Australia, we expect increased foreclosure activity in 2021 due to higher unemployment, even though banks will be able to offer payment deferrals on a case-by-case basis up to and including March 2021, and government stimulus packages may be extended past their scheduled expiry dates in some limited capacity.
The headwinds facing the Australian property market have been well articulated on this site and include:
High unemployment and falling incomes;
Collapsing immigration, which will mostly impact Melbourne followed by Sydney;
High rental vacancies and falling rents;
Tightening mortgage availability (despite low mortgage rates), as lenders become increasingly concerned about borrowers’ servicing ability; and
Unwinding of mortgage repayment holidays and emergency income support.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
