The housing market boomed in the latter half of 2020, as record low mortgage rates, displacement due to COVID-19 and increased savings boosted home demand. But those drivers will ease in 2021 and, alongside worsening affordability and record low inventory, home sales will fall back toward their pre-COVID trend. House price growth, which surged to a 6½-year high in late 2020, will also slow, ending the year at around 3.0% y/y. Tight market conditions mean housing starts will see further growth, but at a slower pace as constraints on production start to bite. As vaccines are rolled out rental demand will recover, helped by significant rent cuts in most major cities and the shortage of homes for sale. We now expect apartment income yields to edge back the next couple of years, and rental growth to recover from -4.0% at the end of 2020 to around 1% y/y by the end of 2021.
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