Home ownership falling in many countries, says report

HOME ownership levels are continuing to drop in many countries despite stable or positive outlooks for most mortgage markets, according to a new global report.

    As a result of market dislocations post economic crisis, home ownership levels face challenges as large foreclosure pipelines are expected to displace owners in some countries such as the US, Spain, and Ireland, whilst new lending remains well below pre-crisis levels, particularly in the Eurozone periphery. 

   Stretched affordability, especially in Australia and parts of the UK and a growing preference for renting, are also having an impact, says the annual Global Housing and Mortgage Outlook report from Fitch Ratings.

   The percentage of homeowners in the US has fallen to 65per cent from 69per cent in 2006 and the report suggests that the steady decline has been mainly driven by foreclosures, mortgage scarcity and unemployment.

   In the UK, home ownership has dropped even more sharply, falling to below 65per cent from 73per cent in just six years. On-going affordability pressures in Australia are likely to continue to make renting attractive relative to buying, with the ratio of homeowners falling to 67.5per cent in 2012 from 70.7per cent in 2000.

   It also points out that tight credit availability and stretched affordability should continue to lead to falling home ownership levels in many countries around the globe with a generation of first time buyers largely priced out of the market.

Supporting factors for the expected improvement in the mortgage market include better macro-economic conditions, low interest rates, and for some markets, improvements in affordability.

   The main emerging threats are the prospect of rising interest rates for some markets and deflationary pressures in the Euro zone. “Gradual rate rises are expected in the US and the UK, but the Euro zone’s mostly high sensitivity to rate changes will not be tested anytime soon. Australia, Hong Kong, and Singapore exhibit relatively high rate sensitivity, but balancing factors such as economic performance mitigate this,” the report explains.

   It also says that the effects of the housing and economic crises have been long lasting, particularly in the Euro zone periphery, where the outlooks are weakest. Fitch expects moderate house price growth of around two per cent in the Netherlands, US, UK and Canada, albeit with some concerns regarding sustainability in the latter.