Australian house prices

Australian house prices to soar by up to 16% in 2021, ratings agency says

PHOTO: Fitch predicts Australian house prices will rise by between 14% and 16% this year. Photograph: Blake Sharp-Wiggins/The Guardian

Fitch says lockdown savings, income support and low interest rates are pushing prices higher than if Covid had not happened

Australian house prices are set to soar by as much as 16% this year, driven by government support and stronger than expected economic growth, the ratings agency Fitch predicts.

This is significantly higher than the agency’s previous estimate of between 3% and 5%, released in December.

Fitch has also bumped up its house price growth forecasts for the US, Canada, Ireland and Denmark.

It said some of the countries have benefited from vaccine programs rolling out earlier than Fitch had expected.

Fitch said the pandemic had also wreaked less economic damage than it had expected, causing it to cut its estimates of unemployment this year.

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This, “along with government support measures, has kept household income levels stable for many and fed into strong consumer sentiment,” the agency said.

It said lockdowns enabled people who were able to work from home to save money towards a deposit.

“Lockdowns, border closures and working from home resulted in high savings in 2020, enabling purchasers to save home deposits earlier than expected,” it said.

“Incomes remained resilient for many homeowners and buyers.”

This had combined with record-low interest rates to keep buying a home possible despite rising prices – but the agency warned that first homebuyers might start to find prices too high as investors return to the market.

“Low interest rates in Australia have also started to encourage housing investors into the market, potentially replacing demand from first-time buyers as they start to be priced out,” Fitch said.

READ MORE VIA THE GUARDIAN