I Bought My Home Last Year. Now Property Prices Are Falling. What Should I Do?

I Bought My Home Last Year. Now Property Prices Are Falling. What should I do?

You bought your first home in 2025.

You saved for years, went to countless open homes, finally got your offer accepted and picked up the keys.

Then you opened the news this week.

Property prices are falling.

And now you're wondering whether you paid too much for your home.

Or worse, whether you could end up owing the bank more than your property is worth.

Let's talk about something called negative equity.

First, what is negative equity?

Negative equity happens when your outstanding home loan is greater than the current value of your property.

Here's an example.

You bought an apartment in Sydney for $900,000.

You borrowed $810,000 from the bank.

A year later, property values in your area have fallen by 15%.

Your apartment is now worth approximately $765,000.

But let's assume your mortgage balance is still around $800,000.

That means you owe the bank $35,000 more than your property is worth.

That's negative equity.

It doesn't mean you've lost your home. It means the value of the property securing your loan has fallen below your outstanding mortgage balance.

Are Australian homeowners experiencing negative equity right now?

There's certainly been a lot of discussion about falling property prices in the media.

But here's an important distinction.

Falling property prices don't automatically mean everyone is in negative equity.

According to the Reserve Bank of Australia's October 2026 Financial Stability Review, fewer than 1% of Australian mortgage borrowers are estimated to be in negative equity.

The RBA also estimates that even if property prices fell another 20% across the board, around 5% of mortgages would fall into negative equity.

That's a hypothetical scenario, not a prediction.

The RBA notes that recent buyers and people with larger loans relative to their property's value are more exposed to this risk.

You can read the RBA's October 2026 Financial Stability Review.

Will my bank ask me to pay more money if my house value drops?

Not simply because your property value has fallen.

If you're continuing to make your scheduled mortgage repayments, a fall in your property's value doesn't ordinarily mean the bank will demand that you immediately repay the difference.

Your mortgage agreement still applies.

The important thing is that you continue meeting your repayments.

This is why negative equity and mortgage stress aren't the same thing.

You can have negative equity and still comfortably afford your home loan.

And you can have plenty of equity but struggle with repayments because your income or expenses have changed.

What if I want to refinance my home loan?

This is where falling property values can become a practical problem.

Let's say your apartment is now worth $765,000 and your mortgage balance is $800,000.

You want to refinance because you've found another lender offering a better interest rate.

The problem?

A new lender will generally assess your loan against the property's current valuation.

In this example, your loan would be approximately 105% of the property's value.

That makes refinancing much more difficult, because the lender may not accept that level of lending against the property.

You might need to reduce your loan balance, contribute additional funds or explore options with your existing lender.

That doesn't mean you should assume you're stuck with your current interest rate forever.

But it does mean it's worth understanding your position before applying elsewhere.

What happens if I need to sell?

This is probably the biggest concern.

If you sell a property for less than your outstanding mortgage, you may need to contribute money to repay the remaining debt.

And don't forget, selling a property can involve agent commissions, marketing expenses and legal fees.

Using our earlier example:

Property sale price: $765,000
Outstanding mortgage: $800,000
Shortfall before selling costs: $35,000

You'd need to work out how that shortfall, plus the selling expenses, would be covered.

This is why negative equity becomes particularly difficult when someone needs to sell because of a relationship breakdown, job loss or other major life change.

If you're in this situation, speak to your lender and get appropriate legal or financial advice before committing to a sale.

Should I be worried if I bought recently?

I'd be paying attention, but I wouldn't panic simply because the news says property prices are falling.

I'd be asking myself three questions.

Can I comfortably afford my repayments?

If the answer is yes, that's important. Your ability to continue servicing the loan matters.

Am I planning to sell or refinance soon?

If you're staying in your home for the foreseeable future, a short-term movement in its estimated value may have less immediate impact than it would if you needed to sell next month.

Do I know how much I still owe?

It's worth checking your current mortgage balance rather than relying on what you originally borrowed.

Remember, property prices can move in both directions. There's no guarantee values will recover within a particular timeframe.

What if I'm already struggling with my mortgage?

Please don't wait until you've missed several repayments to ask for help.

If you're worried about keeping up with your mortgage, contact your lender's hardship team as early as possible.

Depending on your circumstances, options may include temporarily reducing repayments or adjusting your loan arrangements.

ASIC's Moneysmart has a helpful guide on what to do if you're having problems paying your mortgage.

You can also speak with a free financial counsellor through the National Debt Helpline on 1800 007 007.

My perspective as a mortgage broker

I think it's important to remember that your home is somewhere you live, not just a number on a property valuation.

Of course, nobody wants to buy a property and watch its value fall.

But if you bought a home you can afford, you're comfortable with the repayments and you have no immediate plans to sell, a falling market doesn't automatically mean you've made a terrible financial decision.

What matters is understanding your position and having a plan if your circumstances change.

And if you are considering refinancing, I'd much rather look at your current loan and property value before you start submitting applications.

Worried about your home loan?

I'm Eshanee, founder of April Six Finance.

I help homeowners across Sydney (and Aus) understand their mortgage options, whether they're looking to refinance, reduce their repayments or work out what their next move could look like.

If you're concerned about your current mortgage, click here to chat to Eshanee.

We can start by looking at your numbers and what options may be available to you.

Any information or advice contained on the April Six Pty Ltd website is general in nature only and has been prepared without considering your individual personal objectives, financial situation or requirements. Before acting or relying on this information, you must consider the appropriateness of this information with regard to your individual circumstances and objectives.

Eshanee Collins is the founder of April Six, a Sydney-based mortgage broker for first home buyers and first-time property investors across Australia.

📱 0488 471 888 | @eshanee_thebroker | aprilsix.com.au