Fitch Ratings report warns Australia and Spain to see largest house price falls due to coronavirus crisis

Australia and Spain will see the largest falls in house prices in the rest of 2020, with the coronavirus pandemic derailing growth of the property market. Under new baseline forecasts by global ratings agency Fitch, Spain would suffer the biggest fall in house prices, expected to decrease by 8-12 per cent in the full-year 2020, while Australian prices were tipped to drop 5-10 per cent. The UK would also experience a decline of 3-7 per cent “assuming the avoidance of a ‘cliff-edge’ Brexit at the end of this year”. Meanwhile, home price moves would be “flat to slightly negative in the US and China and broadly flat in Germany for the remainder of this year”. “All six markets are suffering from contracting economies and deteriorating labour-market conditions due to the pandemic,” Fitch said in its report, released today. The ratings agency said China — the original epicentre of COVID-19 — would likely escape with the smallest impact on house prices. “Pent-up demand, a quick reopening after lockdown, lower mortgage rates and the easing of regulatory restrictions will support largely stable home prices for the rest of 2020 and 2021,” Fitch said. “Economies that reopened too quickly from lockdowns face more downside risk from the re-imposition of restrictions and resultantly weaker labour markets. The US currently stands out in terms of new daily coronavirus cases.” Fitch also forecasted home prices would “largely stabilise in the UK and Spain, with a higher possibility of muted growth in Australia in 2021”. “Any growth in the US, China and Germany will also be muted and prices could fall slightly in the US and Germany.” It comes a week after a National Australia Bank report said WA house prices were set to tumble more than 10 per cent over the next 12-months due to the COVID-19-fuelled combination of job losses, lack of population growth and lower interest rates.