Housing Affordability Challenges Persist for APAC Homebuyer: Moody's Report

Moody’s Investors Service Predicts Subdued Homebuyer Sentiment in Certain Economies

The housing affordability landscape across the Asia-Pacific (APAC) region is set to experience slight improvements this year, but the challenge of mortgage repayment in the face of elevated interest rates remains, leading to subdued homebuyer sentiment, reveals a recent report by Moody’s Investors Service.

Titled “Housing Affordability in Asia-Pacific: Improving but Still a Challenge,” the report delves into the intricate dynamics of housing affordability across APAC. While housing affordability is set to improve in certain areas, including China, Hong Kong SAR, Australia, Indonesia, and Japan, regions like Singapore and New Zealand will continue to grapple with this concern.

Factors Behind the Homebuyer Affordability Shift

Moody’s attributes the enhanced housing affordability to the growth in GDP per capita surpassing changes in home prices. However, a pertinent issue persists—interest rates continue to remain at elevated levels across many APAC regions, thereby exerting pressure on the repayment capacity of mortgage holders.

Housing Affordability Challenges Persist for APAC Homebuyer: Moody's Report

Cedric Lai, Moody’s Vice President and Senior Analyst, underscores the subdued nature of homebuyer sentiment in select APAC economies. This dampened sentiment, he elaborates, is likely to impact the financial performance of property developers operating within these regions over the forthcoming year.

Diverse Scenarios Across Economies

In China, there has been a recent dip in developers’ home sales from a previous low, following a recovery during the first quarter of 2023. In Hong Kong, muted sentiment among homebuyers is compelling developers to adopt a cautious pricing strategy to sustain sales. Conversely, Australia’s developers stand to benefit from robust housing demand over the medium term.

Impact on Credit Dynamics

The report offers insights into the nuanced credit implications stemming from improved housing affordability across APAC. In China, as affordability receives a boost and recent interest rate reductions take effect, experts predict that the risks associated with mortgage repayments for home loan borrowers will ease. This positive development bodes well for the residential mortgage-backed securities (RMBS) sector.

In Australia, the housing affordability situation remains a point of concern for both RMBS and covered bonds. Meanwhile, analysts anticipate that the credit quality linked to mortgages supporting RMBS structures will remain strong in Japan.

Future Outlook and Conclusion

While some economies in the Asia-Pacific region are on the verge of experiencing an enhancement in housing affordability, Moody’s report underscores that the challenge of housing affordability is far from eradicated. The immediate future remains marked by this challenge for homebuyer across the region. Nevertheless, the silver lining lies in the incremental enhancement of affordability in select economies, a beacon of hope for the APAC housing market.

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