What does it mean for the housing market to peak – and has it?

by Micah Guiao14 Jan 2022

There has been non-stop talk about whether the housing market has peaked among industry experts – but how can one know for sure?

Tim Lawless, research director at CoreLogic, described a peak in housing values as a “consistent trend in negative monthly movements.”

“To date, the quarterly trend remains positive across the major regions, with the only exception being Darwin houses, which is the only capital city housing sector to record a negative quarterly change,” Lawless said, explaining that Darwin is a small market and is therefore more prone to erratic movements.

Aside from pattern observation, other reliable indicators include affordability constraints, low auction clearance rates, and weak vendor metrics. Once these are present, a market could be approaching its peak.

“Normally, housing growth trends will gradually slow before moving into a correction phase, which is what we are seeing at the moment,” Lawless said. “However, this isn’t always the case. During periods of shock such as the GFC or early in the pandemic, housing trends turned quite sharply into negative territory.”

As of now, there is no concrete evidence pointing to a market peak. What is certain, however, is that most markets have moved through a peak rate of growth. For example, Sydney and Melbourne noted its peak monthly growth in March and have since declined.

Lawless has also identified Brisbane, Adelaide, and regional Queensland as market exceptions.

“These markets are benefitting from a healthier level of affordability compared with the largest capitals along with a positive demographic trend and consistently low advertised stock levels,” Lawless said.

Ultimately, the tell-tale sign of a market peaking is the long period of decline that comes after it, which can still subject to several macro and micro factors. Whatever the case, one thing is for sure: the recent surge in Omicron cases make it unpredictable to know for now when the market will peak.