New home buyers who purchased with deposits of as little as 5% could find themselves in negative equity if ANZ’s latest property price forecast eventuates, despite the RBA’s decision to leave the cash rate on hold at 4.35% today.
ANZ’s new forecast, released today, now predicts Sydney property prices will drop by a total of 9.9% this year, and another 2.9% in 2027 with a peak-to-trough fall of 14.5%.
If this materialises across houses, Canstar analysis of Cotality data shows the median house price in Sydney could fall by as much as $236,312 from the January 2026 peak through to the trough expected next year, taking the price to just under $1.4 million.
In Melbourne, the peak-to-trough fall of 12.8% could see the median house price drop by $127,577, taking the price down to a much more affordable $869,116.
ANZ is also predicting sizable downturns across the previously teflon capital cities of Brisbane, Perth and Adelaide, which, Canstar estimates, could see each median house price fall by between $50,000 and $100,000.
The bank expects property prices to start regaining ground through the second half of 2027 when the RBA is forecast to start cutting rates.
Projected change to median house prices - ANZ forecast - peak to trough | |||||
|---|---|---|---|---|---|
City | Peak to trough | Price at peak | When | Price at trough | Change |
Sydney | -14.5% | $1,629,736 | Jan-26 | $1,393,425 | -$236,312 |
Melbourne | -12.8% | $996,693 | Nov-25 | $869,116 | -$127,577 |
Brisbane | -7.9% | $1,217,859 | Apr-26 | $1,121,648 | -$96,211 |
Adelaide | -9.8% | $1,012,623 | May-26 | $913,386 | -$99,237 |
Perth | -5.2% | $1,077,250 | May-26 | $1,021,233 | -$56,017 |
Source: Canstar, Cotality Home Value index, ANZ research released 11 August 2026. $ change for each capital is the predicted movement in the median house price in each capital if ANZ's current forecast is realised. Assumes house prices change in line with dwelling forecasts.
These calculations are estimates based on forecasts, which are subject to change and may prove inaccurate. No guarantee can be given that prices will rise in the future. Forecasts should not be relied upon as the sole basis for making financial decisions. Individuals should consider their own circumstances and seek independent financial advice.
Recent buyers could find themselves in negative equity
Canstar analysis of this property price forecast shows a buyer who purchased the median-priced house in Sydney with a 5% deposit at the peak (31 January 2026) could already be in negative equity following the 5.9% year-to-date drop in house prices as recorded by Cotality.
If ANZ’s forecast is realised and Sydney house prices drop 14.5% from the January peak through to mid next year, this buyer could find themselves in negative equity by as much as 9%, meaning they would owe an estimated $128,322 more to the bank than their property was worth, despite making standard principal and interest repayments over 17 months (does not include any extra repayments made).
For a similar buyer with a 20% deposit, they would have an estimated 8% equity in their loan under the same scenario.
Potential drop in equity by mid-2027 on median-priced Sydney house bought at peak with 5% vs 20% deposit | ||
|---|---|---|
5% deposit | 20% deposit | |
Price at start | $1,629,736 | $1,629,736 |
Equity at start % | 5% | 20% |
Mid 2027 | ||
Principal paid (deposit + repayments excl interest) | $107,990 | $348,266 |
Equity % | -9% | +8% |
Equity $ (value of property minus amount owing) | -$128,322 | +$111,954 |
Source: Canstar. Based on an owner-occupier buying a median priced property at the peak in Sydney as at 31 Jan 2026 (Cotality), taking out a standard 30-year loan at the average new customer owner occupier variable rate and making standard principal and interest payments through to 30 June 2027. Assumes rates changes are applied the month after an RBA decision and that rates remain on hold from today to end of June 2027. House price changes are based on Cotality data for 31 July 2026 and ANZ property forecasts.
Low-deposit loans surge 51% in just 6 months
Banks approved a record $10.2 billion in new owner-occupier loans with deposits of 5% or less in the six months to 31 March this year.
That’s an increase of $3.5 billion, or 51%, compared to the previous six months – the biggest jump in the history of the dataset – according to APRA property exposure statistics released in June.
The surge coincided with the uncapping of the government’s Home Guarantee scheme on 1 October last year.
These risky low-deposit loans now account for 4.3% of all new owner-occupier mortgages over the six-month period, the highest on record.
Value of owner-occupier mortgages taken out with 5% deposit or less | |
|---|---|
6 months to March 2026 | Change from previous 6 mths |
$10.2 billion (4.3% of all new OO mortgages) | +$3.5 billion +51% |
Source: APRA Quarterly ADI Property Exposure statistics, prepared by Canstar. Based on all authorised deposit-taking institutions.
Canstar’s data insights director, Sally Tindall, says, “ANZ’s new forecast paints a pretty bleak picture for anyone who bought at or near the peak in Sydney, particularly those with very little in the tank in terms of a deposit."
“If these forecasts prove accurate, some recent buyers in Sydney could find themselves owing the bank more than their home is worth before they’ve even celebrated their first anniversary as a homeowner.
“Buyers in other markets could also find their equity falls into negative territory if ANZ’s peak-to-trough forecasts are realised.
“The surge in low-deposit lending makes this particularly troubling. More than $10 billion worth of new owner-occupier mortgages were taken out with deposits of 5 per cent or less in just six months through to March of this year. As a proportion of all owner-occupier new loans it was just 4.3 per cent and unlikely to have the regulator worried, however, this proportion was a record high, at a time when property prices were just starting to slide.
“What’s important to understand is that negative equity isn’t necessarily a financial disaster if you can keep making your repayments and stay in your home. Property prices move in cycles, and ANZ is already forecasting a recovery once interest rates start coming down.
“The problem is, that negative equity can take away your flexibility. If you need to sell you could be forced to find the cash to cover the shortfall.
“It can also make refinancing harder, particularly if you’re trying to move to a cheaper loan at a time when you could benefit from a lower rate.
“For anyone who bought recently with a small deposit, the message is simple: don’t panic, but don’t ignore the risk either. Focus on building up as much of a financial buffer as you possibly can to keep your mortgage on track if your financial situation hits a bump in the road.
“For prospective buyers, six-digit drops in property prices could well create the window of opportunity they’ve been looking for. Just remember, however, these are forecasts and the market could recover a lot faster than predicted. If you’re looking for the bottom, you might miss the right property for you.”
