MOST major housing markets will not be able to keep up with customer price inflation in 2021, facing multiple downside risks despite rising strongly this year amid the aftermath of the pandemic and rock-bottom rates, Reuters polls showed.
Since the Covid-19 outbreak started, it has led to supply chain disruption, stalled economic activity, pushed the world economy into its deepest recession and left many millions jobless, as shown in a Reuters graphic.
However, many governments around the world have lifted lockdown restrictions and reopened parts of their economies in the past few months, causing an unprecedented amount of fiscal and monetary stimulus that boosted the housing market activity.
The poll that was conducted between Sept 15 -29, 2020 with 123 analysts showed that average home prices will rise in a few countries this year on pent-up demand and a shortage in supply, that surge was expected to me tamed next year.
“One the long-run effects of the pandemic has been to trigger a structural increase in housing demand,” Capital Economics London’s Hansen Lu said.
“The housing market recovery has exceeded all expectations and we have substantially upgraded our 2020 house price forecast in response,” he added.
Looking ahead, Lu believes that a weak economy, tight credit conditions and the end of these short-term factors supporting demand will hold back growth in house prices next year, with expectations for house prices to stagnate in 2021.
With many businesses permanently damaged by the pandemic, high unemployment was expected to be the biggest threat to the housing market activities over the coming years.
However, the federal reserve’s latest policy shift along with the limited supply of affordable homes was expected to support United States house prices this year in an otherwise-gloomy economic backdrop, with predictions for 2021 less optimistic.
“Central banks provide cheap financing and increasingly negative real rates makes housing an attractive alternative investment,” Citi London global economist Pernille Henneberg.
“But lack of appetite for lending for house purchases or tighter credit standards, due to worries about borrowers’ creditworthiness, may challenge the monetary policy transmission into the real economy,” Henneberg added.
Over 60% of analysts (57 out of 92) believes that it was more likely they would cut their forecasts than upgrade them.
“House price appreciation will slow in 2021 as the number of households in forbearance rises and weighs on the broader housing market,” Moody’s Analytics economist Brent Campbell said.
“Under out constant severity stress scenario, the US enters a double-dip recession and both the labour and housing markets don’t sustain a persistent turnaround until mid-2022,” Campbell said.
British home prices were expected to mark a reversal and stagnate next year after a 2% rise this year.
Meanwhile, Canadian home prices were set to rise slower next year compared to 2020 as higher unemployment and lower immigration levels cool the market down.
“The future of immigration is the big question mark. The lack of supply, particularly insufficient affordable housing, is very unfortunate,” Montreal’s Laurentian Bank chief economist Sebastian Lavoie noted.
Indian and Australian house prices were forecasted to this year and next on higher unemployment, while weak consumer confidence and fears of a second wave of infections has dampened chances for a sustainable rebound in China.
“For the rest of 2020, the risks are probably titled to the upside, with the large degree of fiscal stimulus helping affordability, Sydney’s ANZ senior economist Felicity Emmett said.
“But in 2021, when mortgage deferrals end and unemployment peaks there is a risk of larger falls,” she added. – Oct 1, 2020
