Home values have fallen for six months. What it means for valuations, LVRs and refinancing

This article looks at what the latest data shows and what it means in practice for commercial borrowers, investors and the brokers who advise them.

What the September data shows

Cotality's national Home Value Index fell 1.1% in September, the sixth straight month of falling values. National dwelling values are now 5.2% below their March 2026 record high.

Source: Cotality Home Value Index, September 2026.

The decline is widespread. Every capital city except Darwin recorded a fall in September, along with 71% of regional sub-markets. Over the three months to the end of September, 97% of capital city suburbs fell in value.

City results vary considerably:

• Brisbane recorded the sharpest monthly fall among the capitals at 1.5%, just ahead of Sydney's 1.4%.
• Sydney is leading the correction, with values now 8.6% below their February peak.
• Melbourne is falling more slowly, down 0.7% in September, but values are 7.2% below their November high and 7.5% below the March 2022 record.
• Perth and Darwin still show strong annual gains of 10.1% and 11.9%, while Sydney and Melbourne are down 7.0% and 6.2% over the year.
• Regional markets have held up better, rising 5.6% over the year compared with a 1.8% annual fall across the combined capitals.

The more important number: how long it takes to sell

For anyone relying on a property sale to repay a loan, transaction volumes and selling times matter as much as prices.

Cotality estimates that home sales over the past three months were 19.1% lower than a year ago nationally, and 13.3% below the five-year average. Brisbane and Sydney saw the steepest falls in sales volumes, down 27.2% and 26.5% respectively.

Fewer sales means stock is building up. Across the capitals, new listings were 9.2% lower than a year ago, but total inventory was 23.1% higher. Capital city homes now take a median of 39 days to sell, up from 23 days a year ago.

Why values are falling

Cotality attributes the downturn to affordability constraints, higher interest rates, elevated living costs and weaker consumer sentiment, all of which have reduced buyers' capacity and willingness to purchase. The RBA's recent increase to 4.60% adds pressure, and Cotality notes that the possibility of a further rise in November may also be weighing on confidence. It also points to changes to negative gearing and capital gains tax settings announced in the Federal Budget, which it says have already led to a sharp reduction in investor demand.

There are offsets. A still-resilient labour market and persistently low levels of new housing supply should limit the risk of a sharper correction. Cotality's central expectation is a gradual drift lower in values rather than a severe downturn.

What this means for property-backed borrowing

1. Valuations will reflect today's market, not last year's

A property valued at the peak may not support the same loan amount now. Borrowers planning a refinance or equity release should base their numbers on current comparable sales, not a historical valuation or an online estimate. Valuers are working in a market with fewer sales and longer selling times, and their reports will reflect that.

2. LVR headroom is shrinking

A 5–8% fall in value can move a loan from comfortable to borderline. For example, a $1.0 million facility against a $1.6 million property is at 62.5% LVR. If the property is revalued at $1.48 million, the same loan sits at about 67.6%. That may still be acceptable, but it reduces the room available for extensions, capitalised interest or further borrowing.

3. Sale-dependent exits need more buffer

If a loan is to be repaid from a property sale, the plan should allow for a longer campaign and a sale price below the original estimate. Brokers should ask clients a simple question: what happens if the property takes 60–90 days longer to sell, at 5% below the expected price?

4. Second mortgages need particular care

A second mortgage sits behind the first mortgage, so falls in value reduce the available equity faster in percentage terms. A careful assessment of the first mortgagee's position, the total combined LVR and the exit becomes even more important. See our earlier article, First mortgage vs second mortgage: how lenders actually assess your security.

5. Regional and smaller markets are not a free pass

Regional values have held up better, but regional markets often have fewer comparable sales and less buyer depth. Lower liquidity can mean longer selling periods when conditions turn.

Where opportunities remain

A falling market is not only a risk story. Buyers have more choice and negotiating power, and vendors are becoming more realistic about price. For well-capitalised investors and developers, this can create acquisition opportunities, provided the funding structure reflects current conditions.

Bridging finance can also help borrowers who want to secure a purchase without accepting a discounted sale of their existing property in a soft market, provided the exit is realistic. See Bridging finance explained.

The Funding Door view

In a falling market, the quality of the security and the credibility of the exit matter more than ever. Every scenario should be assessed on current values, realistic selling times and a clear repayment plan. Borrowers and brokers who build these assumptions into their submissions from the start are more likely to get a fast and clear credit decision.