When will the Australian real estate market peak?


How do you know when a real estate market has peaked? Find out how to read the Australian property market and the main factors impacting housing in Australia in 2022.




Australian home values ​​rose 22.1% last year and the market is showing signs that this extraordinary rate of growth – not seen since the 1980s – is slowing in most capitals.




Yet while the rate of home value appreciation is slowing, markets in the capital and the broader “rest of the state” have yet to peak, sparking much speculation as to whether this will happen in 2022 and will mark the beginning of a downturn.








When to Call a Spike in Home Values




To classify a market spike in a region, we generally look for a consistent pattern in negative monthly movements.




To date, the quarterly trend remains positive across major regions, with the sole exception of Darwin Homes, which is the only housing sector in the capital to register a negative quarterly change.




Darwin’s reading may be more volatile than other cities due to the small market size, so it may be too early to call a peak in this market even though the quarterly growth rate has turned negative.




Maximum vs Maximum Growth Rate




While we can’t see any evidence that specific housing markets have peaked, it is clear that most markets have peaked. What I mean by that is when the markets reached their highest monthly growth rate.




We have seen most capitals reach a maximum growth rate around March 2021.




  • Sydney’s monthly growth rate peaked at 3.7% in March and has since fallen to 0.3%.
  • Melbourne’s monthly growth rate peaked at 2.4% in March, falling to -0.1% in December (the first monthly decline since October 2020).
  • Perth’s monthly growth rate peaked at 2.7% in February. After registering a single month of decline (-0.1% in October 2021), the monthly growth rate accelerated again to reach 0.4% in December.
  • Hobart’s monthly growth rate peaked at 3.3% in March and fell to 1.0% in December.
  • Darwin reached a monthly growth peak in April at 2.7% (0.6% in December).
  • Canberra hit a monthly high in March at 2.8% (0.9% in December).








Market Exceptions and Future Expectations








These markets benefit from a healthier level of accessibility compared to the largest capitals, as well as a positive demographic trend and still low advertised inventory levels.




We could see our two biggest capital markets, Sydney and Melbourne, peak later this year, although the timing is highly uncertain and dependent on a wide range of influences.








Image source: Luis Molinero/Shutterstock.com




Three main factors that determine when and if a market spike will occur




There are many moving parts that will affect the trajectory of housing outcomes. The three main factors impacting market movements are:




  1. Policy factors, such as interest rates and credit availability
  2. Market factors such as trend of advertised inventory levels and housing affordability
  3. Economic factors such as labor market conditions and wage growth




Arguably, the surge in COVID-19 cases associated with the Omicron variant could push back some of these policy tightening decisions, with APRA or RBA unlikely to tighten their policy parameters with so much uncertainty associated with the latest case numbers.




There is also downside risk from a delayed economic recovery associated with lower spending and heightened uncertainty, although a slower-than-expected economic recovery means rates would stay lower for longer.




Key signals that a market is approaching its peak




Normally, housing growth trends will gradually slow before entering a correction phase, which is what we are seeing right now. However, this is not always the case. During periods of shock such as the GFC or at the start of the pandemic, housing trends shifted quite sharply into negative territory.




Other signs to look out for include:




  • increase in advertised stock levels
  • affordability constraints
  • lower auction resolution rates
  • easing vendor parameters such as longer days on market and higher discount levels




It is fair to say that we are currently seeing a relaxation of all these measures, albeit from a historically high base.




We also consider macro factors, which could affect housing demand, such as the possibility of higher interest rates or tighter credit policies. Both of these factors present a high level of uncertainty at this time, especially given the latest wave of COVID-19 cases associated with Omicron which could weigh on economic activity.




What to expect after a market spike




Once a market peaks, the typical trend is that values ​​will experience a period of decline. The duration and severity of the decline depends on a wide range of macro and micro factors.




Since the late 1980s, Australia has experienced national downturns ranging in severity from a high of 1.0% to a low in 2015-2016, a temporary correction after the first round of credit crunch via the APRA’s 10% speed limit on investment loans, down from the most recent 8.4% cut in the 2017-19 recession.




At the capital level, the most severe downturns followed periods of exuberance such as the mining infrastructure boom in Perth and Darwin, where housing values ​​in Perth fell by 20.0% over 64 months (through peaking in June 2014 and finding a low in October 2019). In Darwin, home values ​​fell by 32.7% over 69 months (May 2014 to February 2020), although both declines were preceded by a dramatic rebound in values.












Cover image source: Netrun78/Shutterstock.com








Tim LawlessAbout Tim Lawless




Tim Lawless is Research Director of CoreLogic Asia-Pacific. He is widely regarded as one of the leading analysts and commentators on the Australian property market by businesses and the media. His knowledge and expertise are sought after by a myriad of government entities and regulators as well as national and international companies operating in the real estate, banking and finance sectors. Tim has over 20 years of experience in similar roles and holds a Bachelor of Commerce, specializing in Information Management, from Queensland University of Technology.












Thank you for visiting Canstar, Australia’s largest financial comparison site*