Housing affordability to remain a challenge for homebuyers in APAC

This is despite a slight improvement expected across some markets.

Although Asia-Pacific's housing affordability will generally improve slightly, in some economies borrowers will still struggle to repay mortgages amid elevated interest rates and homebuyer sentiment will remain subdued, said Moody's Investors Service in a new report.

"Housing affordability will improve slightly in China (A1 stable), Hong Kong SAR, China (Aa3 stable), Australia (Aaa stable), Indonesia (Baa2 stable) and Japan (A1 stable) this year, as GDP per capita growth outpaces home price changes. Despite improving, affordability will remain a stretch for homebuyers in some parts of Asia-Pacific or fall short of inspiring a major pick-up in property market sentiment," says Cedric Lai, a Moody's Vice President and Senior Analyst.

Homebuyer sentiment will remain subdued in some Asia-Pacific economies, constraining the revenue and profitability of property developers Moody's rates in those areas over the next to 12 months. In China, developers' home sales have weakened from a low level in recent months after recovering in the first quarter of 2023, while those in Hong Kong will have to adopt conservative pricing to maintain sales amid subdued homebuyer sentiment. On the other hand, in Australia, developers will benefit from strong housing demand over the medium term.

Better housing affordability will have uneven credit implications for Asia-Pacific's mortgage sector. In China, improving housing affordability and recent interest rate cuts will ease mortgage repayment risks for home loan borrowers, benefiting the residential mortgage-backed securities (RMBS) sector. In Australia, housing affordability will remain a risk for RMBS and covered bonds. And in Japan, the credit quality of mortgages backing RMBS will remain strong.