How to read Australia’s housing market
Australian housing values grew 22.1% last year and the market is showing signs this extraordinary rate of growth – not seen since the 1980s – is slowing across most of the capital cities.
Yet as the rate of dwelling value appreciation slows, capital city and broad ‘rest of state’ markets are yet to peak, causing plenty of speculation about whether this will occur in 2022 and mark the start of a downturn.
Three main factors that determine when and if a market peak will occur.
“There are a lot of moving parts that will affect the trajectory of housing outcomes,” Mr Lawless says.
The three biggest factors to impact market movements are:
• Policy-related factors such as interest rates and credit availability
• Market factors like the trend in advertised stock levels and housing affordability
• Economic factors such as labour market conditions and wages growth
“Arguably, the surge in COVID cases associated with the Omicron variant could push some of these policy tightening decisions back, with APRA or the RBA unlikely to tighten their policy settings with so much uncertainty associated with the latest case numbers,” Mr Lawless says.
“There is also some downside risk from a delayed economic recovery associated with less spending activity and heighted uncertainty, although a slower than forecast economic recovery implies rates would stay lower for longer.”
Key signals that a market is 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. 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,” Mr Lawless says.
Other signs to watch for include:
• rising advertised stock levels
• affordability constraints
• weakening auction clearance rates
• softening vendor metrics such as longer days on market and larger levels of discounting
Original article found here written by Tim Lawless.