ANZ forecasts a 14.5% peak-to-trough fall that could push low-deposit buyers into negative equity
Homebuyers who entered the Sydney market with deposits as small as 5% may already be in negative equity following a sharp downward revision to ANZ's property price forecasts, according to new analysis by Canstar.
ANZ now predicts Sydney property prices will fall 9.9% in 2026 and a further 2.9% in 2027, representing a peak-to-trough decline of 14.5%.
The Reserve Bank of Australia left the cash rate unchanged at 4.35% at its most recent meeting, offering no immediate relief to stretched borrowers.
Using Cotality data, Canstar estimates a 14.5% peak-to-trough fall in Sydney would reduce the median house price by approximately $236,312 from its January 2026 peak, bringing it to just under $1.4 million.
Melbourne could see the median drop by $127,577 to $869,116, based on a projected peak-to-trough decline of 12.8%. ANZ also forecasts sizeable falls in Brisbane, Perth, and Adelaide, with Canstar modelling median house price drops of between $50,000 and $100,000 in each of those cities.
| 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 |
A buyer who purchased the Sydney median-priced house at the January 2026 peak with a 5% deposit has already been affected by the 5.9% year-to-date price decline recorded by Cotality.
If ANZ's full forecast is realised, that buyer could find themselves in negative equity by approximately 9% — owing an estimated $128,322 more than the property's market value, even after 17 months of standard principal and interest repayments. A buyer with a 20% deposit would retain an estimated 8% equity under the same scenario.
The exposure is compounded by a surge in low-deposit lending. APRA statistics released in June show 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 2026 — a $3.5 billion, or 51%, increase on the prior period. The surge followed the removal of caps on the federal government's Home Guarantee Scheme in October last year. Low-deposit loans represented 4.3% of all new owner-occupier mortgages in the period, the highest proportion on record.
ANZ expects prices to begin recovering in the second half of 2027, when the RBA is forecast to commence rate cuts.
| 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 |
"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," said Sally Tindall (pictured right), data insights director at Canstar.com.au. "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."
Tindall stressed that negative equity was not necessarily a financial disaster for borrowers who could maintain repayments and remain in their homes, noting that property prices move in cycles and that ANZ was already forecasting a recovery once interest rates begin to fall.
However, she warned that negative equity could strip borrowers of flexibility. Those who needed to sell could be forced to cover any shortfall in cash, and refinancing to a cheaper rate would become more difficult at a time when the benefit of doing so would be greatest.
"For anyone who bought recently with a small deposit, the message is simple: don't panic, but don't ignore the risk either," Tindall said. "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."
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