Home prices to remain flat in Australia and Indonesia over the next year

Meanwhile, Japan home prices could slightly increase.

Over the next six to 12 months, analysts at Moody's Investors Service expect home prices will stay broadly flat in Australia and Indonesia, increase modestly in Japan and slightly decline in mainland China and Hong Kong.

“In mainland China, the residential property market has weakened from a low level in recent months after recovering in the first quarter of 2023. The government has lowered interest rates and rolled out supportive measures for the property sector. But we expect lingering concerns over future economic growth, job security and project incompletion risk to keep homebuyers cautious. In this environment, we expect prices will slightly decline on average in mainland China over the next 12 months,” the report said.

Here’s more from Moody’s:

In Hong Kong, home prices recovered moderately in the first half of 2023 after a decline in 2022. But we expect elevated interest rates and capital market volatility to constrain homebuyer sentiment over the next several quarters. We expect these conditions will result in a mid-to-high single digit decline in prices in the next six to 12 months, largely giving up gains accumulated in the first half of 2023.

In Australia, elevated interest rates will continue to constrain prospective homebuyers' capacity to borrow and weigh on home prices. However, housing supply is low, while low unemployment and strong migration into Australia will support demand. These factors will likely keep Australia's home prices broadly flat over the next year. After declining for much of the past year as interest rates rose, average prices have edged higher in the first half of 2023.

In Indonesia, demand and prices for new homes will remain largely stable over the next 12 months as domestic banks continue to hold mortgage rates steady despite the higher interest rate environment. Real estate developers are also maintaining the average selling price per square meter or reducing the size of homes to keep absolute selling prices per unit affordable.

In Japan, home prices in the greater Tokyo metropolitan area will likely have modest single digit percentage growth over the next six to 12 months given inflationary cost pressure on construction and housing equipment. Home prices in Japan have increased considerably over the past two years because of strong demand and supply dynamics.