In the UK, the Netherlands and Ireland, population growth will support housing demand and property prices, says Moody’s Investors Service in a special report published today.
“In our view the rising population in these countries combined with a housing supply shortage and robust economic growth will support house prices and therefore help reduce losses on residential mortgage loans,” says Gaby Trinkaus, an Assistant Vice President – Analyst at Moody’s.
“Additionally, the size of the 25-35 age bracket, which forms the core of the first-time buyer segment, is expected to remain largely stable in the UK and the Netherlands until 2020. While this demographic is projected to shrink in Ireland based on Eurostat data, the economic recovery and improved employment rates will support the market,” observes Ms. Trinkaus.
The rating agency’s research compares the impact of population forecasts for the UK, Dutch, Spanish, Italian and Irish residential mortgage-backed securities (RMBS) markets, based on data from Eurostat. The UK is projected to experience population growth of 3.2% until 2020, with 1.5% growth in the Netherlands, which will support housing markets in the context of a strong economic environment.
While Ireland’s population growth is set to slow down to 0.2% over the next five years, Moody’s considers that the strong economic recovery will draw recent expatriates back and eventually support a rise in population, supporting housing demand.
Moody’s says Spain’s economic recovery could counteract the effect of a shrinking population (based on a -1.3% decline until 2020), reducing downward pressure on house prices. The economy’s recovery will determine how long house prices will stay flat and how long it will take to alleviate the stock of unsold new houses.
“A fall of the 25-35 segment in Ireland and Spain may weaken housing demand in and of itself. However, this segment will benefit the most from improved income prospects in future and increased mortgage lending activity, which could lighten the pressure on house prices and subsequently RMBS collateral performance,” says Greg Davies, an Assistant Vice President at Moody’s.
“Better employment and income prospects in Spain and Ireland will improve first-time buyers’ affordability, while house prices are still low and banks are increasing their focus on mortgage lending,” observes Mr. Davies.
Italy’s 1.7% projected population increase (2015 to 2020) is markedly slower than the 3.0% rise over the past five years (2010 and 2015). A slower population increase and muted economic growth will weigh on housing demand. These factors, combined with Moody’s assessment of an oversupplied housing market, indicate that house prices will remain steady in Italy, underpinning stable loss severities and RMBS collateral performance.
The material has been provided by InstaForex Company – www.instaforex.com