Fitch: Australian House Prices to Rise, Japan and Korea Stable

(The following statement was released by the rating agency)

Link to Fitch Ratings' Report: Global Housing and Mortgage Outlook

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=729595

SYDNEY/LONDON, January 21 (Fitch) Australian housing remains expensive by many 
global measures, but prices will rise again in 2014, although at a much slower 
rate than last year, Fitch Ratings says.  We expect prices in Japan and South 
Korea to be largely stable, with slight nominal increases possible thanks partly 
to government support in both countries. 

Fitch’s "Global Housing and Mortgage Outlook", published on Tuesday, compares 
house prices and affordability around the world by looking at house price/income 
ratios, house price/GDP per capita, and house price/rent. Despite Australian 
prices being high by all three measures, the market will be supported by 
continued (albeit slowing) economic growth, strong affordability following rate 
cuts by the Reserve Bank of Australia in 2011-2013, and possible undersupply. We 
therefore forecast a moderate national increase of 4%. This would be 
considerably less than the 9.8% rise in the 12 months to December 2013, which 
was largely driven by Sydney, Perth and Melbourne. 

The combination of high house price-to-income ratios and prices that are above 
the long-term average ratio relative to rents  suggests that the potential for 
further increases in real terms is limited over the next decade. This trend is 
consistent with France, the UK and Canada, which also have high house 
price-to-income ratios.

Australian cities appear expensive compared with cities in other countries by 
house price-to-income ratios. However, the ratio has been in the same range for 
a decade. Fitch expects affordability in Australia to deteriorate in the near 
term, with house prices continuing to rise more than income levels. Prices in 
Sydney, Melbourne and Perth are likely to rise again in 2014, although more 
slowly than in 2013. Prices in some other cities may remain flat. We expect 
arrears to increase slightly as unemployment rises. 

We expect lending net volumes to continue to grow steadily due to increasing 
activity in the housing market. Mortgage lending growth has been driven by 
investors and existing owner-occupiers. First-time buyer activity has fallen to 
historical lows, reflecting the inaccessibility of housing to lower-income 
households. 

Overall Japanese house prices are still high, but we expect a mild improvement 
in affordability in 2014. We expect prices to be broadly flat, as government 
measures such as mortgage tax deductibility offset a fall in demand after the 
planned consumption tax rise in April. However, we expect wages to increase 
slightly and affordability to remain supported by low mortgage rates. 

The Korean government is also supporting the housing sector, via measures such 
as house purchase tax cuts, lower government mortgage rates through the Korea 
Housing Finance Corporation, or limiting supply. Combined with an improving 
economy, this should result in stable prices in 2014. 

Fitch’s "Global Housing and Mortgage Outlook" includes forecasts for house price 
developments, arrears and mortgage lending volumes for 17 countries around the 
world and compares these trends between countries. The report is available by 
clicking the link above or at www.fitchratings.com. 

Contact: 

Ben Newey

Director

Structured Finance

+61 2 8256 0341

Fitch Australia PTY Limited

Level 15

77 King Street

Sydney

NSW 2000

Ben McCarthy

Managing Director

Structured Finance

+61 2 8256 0388

Natasha Vojvodic

Senior Director

Structured Finance

+61 2 8256 0350

Media Relations: Iselle Gonzalez, Sydney, Tel: +61 2 8256 0326, Email: 
iselle.gonzalez@fitchratings.com; Leslie Tan, Singapore, Tel: +65 67 96 7234, 
Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, 
Email: wailun.wan@fitchratings.com.

The above article originally appeared as a post on the Fitch Wire credit market 
commentary page. The original article can be accessed at www.fitchratings.com. 
All opinions expressed are those of Fitch Ratings.

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