The rise in mortgage rates since the start of the Iran War will worsen already-stretched housing affordability. This will weigh on housing activity over the next couple of quarters and presents a downside risk to our view that existing home sales will rise to around 4.25m annualised by year-end. We now expect house prices to grow by just under 1% this year before rising to 2.5% in 2027. In contrast, the relative improvement in rental affordability means rental growth should fare a bit better this year.
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