Property Prices Are Falling. What Should Investors Do Now?
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The
cash rate is now 4.60%.
For Australian property investors, the immediate effect is obvious: higher borrowing costs.
But the more important effect is what those higher costs do to the rest of the portfolio.
Borrowing capacity can change. Cash flow can tighten. A property that was comfortable to hold twelve months ago can require more household income. The next acquisition may no longer fit the way it once did.
At the same time, property prices have been weakening across much of the country.
The RBA increased the cash rate to 4.60% on 29 September, the fourth increase of 2026. The major banks have passed the latest increase through to variable borrowers, taking the cumulative increase this year to one percentage point. RPW_ContentPulse_WeekEnding_09O…
Cotality's September data also showed national dwelling values falling 1.1% over the month, with 97% of capital-city suburbs recording declines over the previous three months. RPW_ContentPulse_WeekEnding_09O…
That combination is creating two very different conversations with property investors.
Some need to strengthen the portfolio they already have.
Others may be approaching a period where weaker market conditions create opportunities.
The starting point is working out which position you are actually in.
Should property investors stop buying when interest rates rise?
Not necessarily.
Higher interest rates change the numbers behind an investment decision. They don't automatically make property a good or bad investment.
An investor with stretched cash flow, limited reserves and reduced borrowing capacity should approach the current market very differently from an investor with manageable debt, strong income, available capital and considerable holding capacity.
Both could own three investment properties. Both could be exposed to the same cash rate.
Their next move could be completely different.
This is why we separate investors into two broad positions when reviewing a portfolio: active or defensive.
It isn't a label for the investor. It is a way of establishing what the portfolio is financially capable of doing now.
The defensive investor: strengthen the portfolio first
A defensive position does not mean an investor has made poor decisions.
It means the portfolio currently has less room to absorb additional pressure.
That might be because repayments have increased significantly, household income is carrying more of the portfolio, a fixed-rate period is ending, borrowing capacity has contracted or cash reserves have fallen.
For these investors, another acquisition may not be the immediate priority.
The work starts inside the existing portfolio.
Review the debt
The structure that helped an investor acquire their first or second property may no longer be the best structure for a larger portfolio.
Review interest rates, loan structure, lender exposure, fixed-rate expiries and refinancing options.
This is also where fixed versus variable becomes a portfolio decision rather than simply a rate decision.
Fixing can create repayment certainty. Remaining variable can preserve flexibility around refinancing, debt reduction or another acquisition.
The appropriate structure depends on what the debt needs to allow the investor to do next.
Review cash flow
Higher repayments rarely affect an investment property in isolation.
They compete with household expenses, other loans, property maintenance, insurance, rates and periods of vacancy.
A portfolio that technically remains serviceable but requires an increasing contribution from salary every month can gradually remove the investor's ability to keep building.
That needs to be visible in the numbers.
Put more pressure into the model
At Ramsey Property Wealth, we're currently stress-testing borrowing costs at around 8% all-in, alongside a more conservative household income assumption. The 8% figure is a stress-test setting, not an interest-rate forecast. RPW_ContentPulse_WeekEnding_09O…
The purpose is straightforward.
We would rather expose a weakness in a model than discover it in the investor's bank account.
If the portfolio remains comfortable under greater pressure, the investor has more options.
If it doesn't, strengthening the position comes first.
The active investor: prepare rather than rush
The other investor is experiencing this rate cycle very differently.
Debt remains manageable. Cash reserves are healthy. Household income comfortably supports the portfolio and borrowing capacity remains available.
For that investor, softer property conditions deserve attention.
National dwelling values fell 1.1% in September. Brisbane recorded a 1.5% monthly decline and Melbourne fell 0.7%, while the correction had spread across the overwhelming majority of capital-city suburbs. RPW_ContentPulse_WeekEnding_09O…
Falling prices alone, however, are not a reason to buy.
The research needs to become more specific as markets separate.
We look at the individual market's housing supply, affordability, population growth, employment base, infrastructure, rental demand and construction pipeline.
Then we bring the investor back into the calculation.
Can they comfortably hold the property at current borrowing costs? What does the acquisition do to cash flow? How much borrowing capacity remains afterwards? Does the property improve the portfolio, or simply make it larger?
The objective isn't to buy because the market has fallen. It is to be financially ready when price, fundamentals and the investor's position begin to line up.
Should investors wait for interest rates to fall before buying property?
Building a property strategy around an early rate cut introduces an assumption that doesn't need to be there.
Headline inflation reached 4.0% in August, while trimmed mean inflation remained at 3.6% for three consecutive months. The RBA's September decision to increase the cash rate to 4.60% was unanimous. RPW_ContentPulse_WeekEnding_09O…
Nobody knows with certainty exactly where interest rates will be twelve months from now.
An investor doesn't need to know.
A more durable approach is to build the portfolio around borrowing costs that exist today and leave enough room to withstand further pressure.
If rates subsequently fall, the investor receives the benefit through improved cash flow and potentially greater borrowing capacity.
Lower rates should improve the position, not rescue it.
Should property investors fix their mortgage or stay variable?
There is no universal answer.
A fixed rate can provide certainty over repayments. A variable loan may provide greater flexibility.
The decision becomes more useful when both options are modelled against the entire portfolio.
That includes:
- existing debt and repayments
- household and rental income
- portfolio cash flow
- available cash reserves
- refinancing plans
- borrowing capacity
- the timing of the next acquisition.
The question is therefore less about correctly predicting the next RBA decision and more about which lending structure supports what the investor is trying to achieve over the next few years.
Fix or ride is a numbers decision, not a headline decision.
Should investors buy now while property prices are falling?
This is where national property commentary becomes less helpful.
A 1.1% national monthly fall does not mean every suburb has become an opportunity.
Nor does a declining market necessarily mean investors should remain on the sidelines.
Ramsey's current research is examining the correction market by market rather than treating Australian property as one cycle. The internal research view is currently differentiated across Melbourne, South East Queensland and Perth, with the underlying plan explicitly cautioning that sub-market signals require further confirmation. RPW_ContentPulse_WeekEnding_09O…
The acquisition decision still comes back to the individual asset and investor.
Price + fundamentals + capacity to hold.
All three need to work.
The national market can tell an investor what is happening.
It cannot tell them what to buy.
The property portfolio review to run after an interest-rate rise
For an established investor, we would bring the decision back to five areas.
1. Debt
Understand the actual cost and structure of every loan across the portfolio.
2. Cash flow
Calculate the real monthly contribution required from household income after rent and
property expenses.
3. Borrowing capacity
Establish what lenders will actually allow you to do next, not simply what you
would like to buy.
4. Holding capacity
Stress-test the portfolio against higher borrowing costs, conservative income
assumptions and normal property expenses.
5. Existing assets
Review whether each property is still performing the job it was originally bought
to perform.
Once those numbers are visible, the next decision usually becomes clearer.
For one investor, it could be restructuring debt or rebuilding cash reserves.
For another, the best decision may be to hold.
And for an investor with sufficient capacity, it may be preparing for an acquisition while competition and prices are softer.
A portfolio review shouldn't be designed to manufacture another property transaction.
It should tell you whether to strengthen, hold or prepare to move.
Active or defensive: which investor are you?
This is ultimately the question we believe property investors should answer following the latest rate rise.
Not where rates will be next year.
Not whether the national market has reached the bottom.
Not whether somebody else is buying.
The investor's own balance sheet should determine the immediate strategy.
The source research behind this week's Ramsey analysis reaches the same conclusion: active investors with buffers and holding capacity can position for opportunity, while defensive investors should revisit cash flow, stress-test the portfolio and review refinancing. RPW_ContentPulse_WeekEnding_09O…
Two investors can own the same number of properties and operate in the same market while requiring almost opposite strategies.
The expensive mistake this cycle will be running the wrong strategy for your balance sheet.
Watch: The Ramsey Report
Interest rates have risen. What should property investors do now?
In the latest episode of The Ramsey Report, we look beyond the RBA announcement at what higher borrowing costs mean for different types of property investors, including cash flow, borrowing capacity, lending structure, portfolio stress-testing and where opportunities may emerge as markets soften.
https://youtu.be/CEg9HTXFMf4?si=O1EkpIl387_sRB2O
Article Contributors
Written By:
Ewan Ramsey
Founder, Director and Investor
PhD research conducted by:
Dr Prabath Morawakage - PhD, CPA
PhD, Real Estate Finance and Economics at Ramsey
General information only. This material does not constitute personal financial, credit, tax or investment advice. Ramsey Property Wealth Pty Ltd | ACR 389087.