How quickly the economic talk can change – where once the worries were of ever-booming house prices, now the conversation is over whether we have reached the peak. The discussion shows the rather disjointed housing market in Australia – not just according to location but the type of dwelling – apartment prices look set to fall, while house prices remain solid.

Two months ago the picture on interest rates looked pretty clear – the next move by the RBA would be to increase rates. The market, in its infinite wisdom, had priced in a full rate rise to occur by June next year.

Now the infinite wisdom is that there is no real chance of a rate change for the foreseeable future:

There certainly is no reason for the RBA to hit the brakes on the economy. Inflation and wages growth is roughly “next to bugger all”, employment growth looks to be coming off the boil (or, more accurately, simmer) observed in the early part of the year, and the hours worked is falling:

The latest construction data, which saw a 0.7% fall in the March quarter, has some economists thinking the GDP figures out next Wednesday could show the economy went backwards in the first 3 months of this year.

And the latest building approval figures out on Tuesday certainly do nothing to suggest work in the building sector is flourishing. In the past year approvals for private sector houses have fallen 8% and for apartments and flats, 19.7%:

And the falls are all across the nation.

Whereas at the end of last year NSW and Victoria were still booming, while the rest of the nation was shrinking, now no state has more building approvals this April compared to last year:

So with the economic activity around the nation hardly looking energised, the only aspect that would have the RBA thinking about raising interest rates is housing prices.

The issue for the past couple years, however, has been that the housing price boom has mostly been a Sydney and Melbourne phenomenon.

And yet now data from CoreLogic suggests prices fell in May in Sydney and Melbourne.

This is somewhat surprising given the most recent housing finance figures would suggest housing prices will continue to rise for at least another six months. The latest housing finance figures saw the value of finance grow by 11% over the past year:

But housing prices also generally move in line with the growth of building approvals, and yet here we see that they are moving in opposite directions. While building approvals are falling, house prices look set to keep rising:

So what is going on?

The issue is that while Corelogic found the prices for apartments in Sydney and Melbourne fell in May, the prices for houses remained solid.

This is not a big surprise – the RBA has been warning for some time about a glut in apartment building in Sydney, Melbourne and Brisbane.

While the low interest rates since 2011 has led to an increase in houses being built, the real explosion has been in apartments, but that ended in the middle of last year:

In the second half of last year, the number of non-house dwelling approvals fell 22%.

And a big part of that was in Sydney, which accounts for around 40% of all apartment/flat building approvals in Australia.

Since the RBA began cutting rates at the end of 2011, non-house approvals have greatly outpaced those for houses in Sydney, but again in the last half of 2016 that number dropped off considerably – down 30%:

And you can see from the breakdown of non-house approvals that the boom has been in apartments of greater than four stories, rather than townhouses or more standard “flats”. But that apartment building boom also looks to have come to an end:

There are still plenty of such apartments in the pipeline, but with this massive growth in the supply of units for rent or sale has come a slowing – and now fall – in their prices.

For now though, the end of the apartment building boom has not led to a similar large fall in apartment prices – certainly nothing close to a 30% fall, and certainly no real sign of any significant slowing in the growth of house prices.

Given concerns of housing affordability, people are rather desperate to see the peak of the housing market. It still looks too early to say that. House prices remain solid, but the signs of slowing apartment prices in Sydney and Melbourne also point to the larger concern that the ramp up in apartment construction could lead to a glut which sees values not just slow but fall – and fall fast.