Housing market holding up better than expected: Fitch

Global housing market activity contracted in the first half of the year, as forecast, but Fitch Ratings now sees better-than-expected results in several markets, including Canada.

In a new report, the rating agency said that, while housing prices have so far moved in line with expectations this year, it has revised expectations for five countries, including upward revisions for Canada, Australia, Japan and Colombia.

“Constrained housing supply and continued high demand supported by better-than-expected economic conditions in [the first half] have supported strong home prices in most markets, including the four countries with upward price revisions,” it said.

As a result, Fitch now expects Canadian home prices to come in flat to down 5% in 2023, which represents “a less severe drop than our previous forecast of -7% to -5%,” it said.

For 2024, Canadian home prices are forecast to rise between 3% and 5%, with mortgage rates expected to decline to a range of 5.9% to 6.15% from a forecast range of 7.0% to 7.5% in 2023.

For Japan, Fitch said it now sees prices rising by 5% to 7% this year, up from its previous forecast of 2% to 4% gains.

And in Australia, prices are expected to rise 2% to 5% in 2023, instead of falling by 7% to 10%, as previously forecast.

Spain is the only country where Fitch revised its forecast down, due to higher interest rates cutting into demand.

For the U.S., Fitch said home prices are “in line with our expectations for 2023, with modest growth attributed to short-term dip in interest rates earlier this year and record low inventory. However, rates have since gone back up, and a mild recession later this year could lead to housing market softening.”

Fitch also said its forecasts for mortgage arrears in the global housing market are largely unchanged.

“Asset performance has remained more resilient than we expected due to mild economic conditions, strong underwriting standards and a significant proportion of fixed-rate products,” it said.

“A delayed recession/downturn of varying severity for most markets will push any meaningful asset performance deterioration further out in 2023 and into 2024,” it added.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.