The global housing market is poised for modest growth in home prices and only small increases in mortgage arrears from their historically low levels, Fitch Ratings says.
In its mid-year forecast, the rating agency said it has boosted its expectations for home price growth in several markets, driven by housing demand generally outstripping supply in global markets.
Fitch raised its forecast for U.S. home price growth to a range of 3% to 5% this year, which brings it in line with its forecast for Canada. Canadian prices are expected to rise 3% to 5% this year before growth accelerates to 5% to 7% in 2025.
By contrast, U.S. price growth is expected to slow to the 2% to 4% range next year.
Alongside the U.S., Fitch boosted its price forecasts for Spain, Netherlands, Brazil and Mexico, citing the same basic supply-demand dynamics.
Fitch said it generally expects home prices to rise modestly in 2024, except for in France and China, where weak demand will see prices decline, and in Japan, where it sees prices stagnating amid higher interest rates.
As for mortgage arrears, conditions have generally evolved in line with forecasts so far this year, Fitch said. It said it “anticipated stability or mild increases in most regions in 2024 and stability or slightly lower rates in 2025.”
“Stable loan performance is underpinned by solid labour markets,” it said. “While arrears may modestly rise in areas with prevalent floating-rate or short-term fixed-rate mortgages, generally disciplined underwriting practices, supportive macroeconomic environment and real home price appreciation will prevent significant spikes.”
For Canada, arrears are expected to creep up to the 0.25% to 0.30% range this year, from 0.2% last year, before easing a bit to the 0.2% to 0.25% range in 2025.
Downside risks to the forecast for global arrears include deterioration in household incomes and high debt-to-income ratios, along with “payment shocks related to all-in homeownership costs, and policy risks due to elections/regime changes,” it said.