Home prices in key APAC markets face headwinds in 2025

Late-stage arrear trends will vary across Japan, China, and Australia.

Home prices in the Asia Pacific region will likely face headwinds with average home prices in China expected to continue falling, whilst prices are projected to grow marginally in Japan and more robustly in Australia in 2025, according to Fitch Ratings.

Fitch forecasts home prices in China to fall by 4%-6% in 2025 as weak market sentiment continues, with the decline extending into 2026 at a pace of 2%-4%.

The gap between the better-performing top-tier cities and other markets will widen amidst strengthened official policy support, but an inventory overhang remains a drag on the overall market.

Still, Fitch expects mortgage rate cuts to enhance borrowers’ serviceability, with high household savings and low loan-to-value ratios to keep late-stage mortgage arrears stable at 0.7%-0.8%.

In Australia, mortgage arrears will fall from 2025 to 2026, to 0.5% to 0.55% in 2026 as lower interest rates improve serviceability. Meanwhile, low unemployment, strong net immigration, and supply constraints will continue to bolster housing prices.

Fitch expects this price growth to decelerate to 4% to 6% in 2025 and 3% to 5% in 2026, as affordability weakens.

As for Japan’s weakening new-home supply, it will temporarily support housing prices in 2025, with limited growth of 0% to 2%.

However, higher mortgage rates and weak demographics will drag the market and prices will fall by up to 2% in 2026. Higher rates and rising cost-of-living pressures will also drive mortgage arrears to around 0.45% to 0.65% by 2026.

Late-stage arrear trends in 2025-2026 will vary significantly across the three markets, falling in Australia but remaining stable in China and deteriorating in Japan.