Already expensive global house prices to get modest boost from rate cut: Reuters poll by Reuters

By Hari Kishan

BENGALURU (Reuters) – Home prices in most key markets will rise modestly this year, and mortgage rates are expected to fall further in the future and help marginally improve the affordability of expensive properties, a Reuters poll of analysts showed .

Most central banks were expected to start cutting interest rates sometime this year, or have already done so, with the US Federal Reserve expected to start at its September 17-18 meeting.

This gives house prices in developed countries, facing the low supply of properties that are affordable for most new home buyers, an impetus to climb modestly higher.

The Reuters poll of nearly 150 real estate analysts conducted between Aug. 19 and Sept. 3 covering the US, UK, Germany, Canada, Australia, New Zealand, China, Dubai and India showed that average house prices in almost all of these markets will rise this year and next.

But compared to recent episodes of expected central bank policy easing, the expected price increases are modest.

While median forecasts showed the change in median home prices in 2024 to range across markets from a modest 1.4% decline to around 8% growth, the overall outlook was positive, with analysts upgrading their outlook for five of the nine real estate markets surveyed since three months. ago.

“Falling mortgage rates in many markets will strengthen the position of aspiring homebuyers, but only modestly, with affordability pressures already at breaking point,” said Matthew McAuley, director of global property research at JLL.

“Increasing proportions of populations in countries such as the US, Canada, UK, France, Germany, Australia and Japan will rely on income-based housing models to meet their housing needs.”

A majority of nearly 80 percent of analysts, 82 of 106, who responded to an additional question said affordability will improve for first-time homebuyers in the coming year. The remaining 24 said it would get worse.

But with supply still tight in most countries, many would-be new home buyers are likely to remain renters for years to come and pay even more for rent.

Urban housing rents were expected to outpace consumer inflation over the next 12 months in all countries surveyed, according to the median forecast of analysts who responded to a separate question.

“In a higher interest rate environment, prime rents continue to outpace capital values…Low inventory levels in many locations and a greater number of potential buyers are driving the trend in many prime rental markets,” said Justin Marking, Global Head of Residential at Savills.

Median US home prices were expected to rise 5.4% in 2024, 3.3% next year and 3.4% in 2026.

Much of this price appreciation has to do with homeowners who have locked in low 30-year mortgage rates, most below 5% and some even below 3%, and are unwilling to part with their homes them with such cheap offers.

While the Fed is expected to begin cutting rates in September and by a total of 75 bps by the end of the year, a lack of adequate supply is already supporting a market where median home prices are well above their peak during the pandemic.

Australia’s average house prices were forecast to rise by more than 6% this year, again due to reduced supply, also bringing average prices above the peak of the pandemic.

“However, it’s worth noting that we don’t anticipate a material improvement in affordability, and home affordability is likely to be structurally higher than before the pandemic in the short to medium term,” said Johnathan McMenamin, chief economist. at Barrenjoey.

In neighboring New Zealand, where prices have risen more than 40% during the COVID-19 pandemic, they were expected to rise by just 1%.

In India, demand for luxury properties from the cash-rich was expected to push up house prices over the next two years. Despite demand from a wealthy few in a country of 1.4 billion, it translates into a sizable market, enough to push the average home price up about 8 percent this year and 6 percent next year.

Germany’s housing market, where house prices fell by 7.2% last year, was expected to stabilize in the coming months, with a 1.4% drop this year, followed by a 2% increase in 2025 .

(More stories from Reuters Global Housing Survey Q3)

(Additional reporting and surveys by Indradip Ghosh, Pranoy Krishna, Jonathan Cable, Sarupya Ganguly, Susobhan Sarkar, Devayani Sathyan and Vijayalakshmi Srinivasan; Editing by Ross Finley and Jonathan Oatis)