House prices begin to fall

A deterioration in the economic outlook and renewed rise in mortgage rates to a 16-year high in September means the housing market is set for a further slowdown. We estimate that mortgage payments as a share of median income rose to 26% in September. That’s higher than the peak of 24% in 2006 and 1989, which were both followed by house price falls. Alongside a recent tightening in credit conditions, that strengthens our conviction that house prices will fall 8% over the next year. Affordability is also stretched in the rental market. We expect this to help cool apartment rental growth from 17.6% y/y in 2022 Q2 to 8% y/y by the end of the year, and 2.5% y/y by end-2023.