Dwellings fell 1.1% in September, 5.2% below peak. The RBA's October FSR says a further 20% fall would push only 5% of mortgages into negative equity

This article is general information only. It does not consider your personal circumstances and is not tax, credit or investment advice. Speak to a registered mortgage broker, tax agent or licensed property adviser before acting on any of the figures below.

Two primary releases, one morning, same story from opposite ends#

Two Australian property data events dropped within hours of each other on 1 October 2026, and together they frame the question every landlord is now sitting with at the start of the December quarter.

At 10am Sydney time, Cotality published the September 2026 Home Value Index. The national index fell 1.1% for the month, the sharpest monthly print of this downturn and the sixth consecutive month of falls. The national index now sits 5.2% below its March 2026 peak. Annual growth is flat, which means the index has unwound every dollar of calendar-year gain and then some.

Later the same morning, the Reserve Bank released its October 2026 Financial Stability Review, with the Resilience of Households and Businesses chapter running the central stress test on exactly the question the Cotality print raises. The headline number is that less than 1% of mortgage holders are in negative equity today, and even a further 20% fall in national dwelling values would only lift that figure to around 5%.

So the price side is coming off hard, and the Bank's own stress test says the balance sheet holds. Both can be true at once, and both matter to a landlord's September quarter review.

The Cotality print, state by state#

The capital city breakdown for September 2026 is the first time this cycle Brisbane has fallen harder than Sydney, which is worth sitting with for a moment. Twelve months ago Brisbane was the standout performer among the five mainland capitals. The September print puts it at the sharpest fall.

• Brisbane fell 1.5% in September, the sharpest monthly capital fall this downturn.
• Sydney fell 1.4%, with the median dwelling value sitting at around A$1.2 million per Bloomberg, 30 September 2026.
• Melbourne fell 0.7%, extending its losses from the February peak to more than 7%.
• Perth, Adelaide and Hobart joined the retreat.
• Darwin was the only capital to rise, at +0.4% for the month.
• Combined capitals fell 1.2% for the month (ABC News, 1 October 2026).

The breadth matters as much as the magnitude. Cotality has 97% of capital suburbs recording a value fall over the three months to September, up from 93% in the August print. That is not a two-city story any more. It is a national one.

The upper quartile is leading the retreat#

Within the capital splits, the top end is doing the heavy lifting on the downside. Cotality's September Monthly Housing Chart Pack has upper-quartile house values in Sydney 10.7% below peak and Melbourne 10.5% below peak (Cotality chart pack, September 2026).

Lower-quartile stock has held up materially better. In Sydney the gap between cumulative falls in the upper quartile and lower quartile is now approximately 5.3 percentage points. For a landlord with a portfolio concentrated in blue-chip stock, that is where the equity drawdown is sharpest. For a landlord in the second quartile and below, the fall has been milder and the yield compression less damaging.

The RBA's October FSR, in a sentence#

The October 2026 Financial Stability Review runs the stress test the September HVI invites.

Three figures from the Resilience chapter matter for an Australian landlord's October planning conversation.

First. Less than 1% of mortgage borrowers are estimated to owe more on their loan than the value of their property today. That is the baseline negative equity rate, after a 5.2% fall from peak on Cotality's series.

Second. The Bank's stress test models a further 20% fall in national dwelling values, on top of what has already happened. In that scenario, only around 5% of mortgages would be in negative equity. The implication the Bank is making is explicit. The current cycle, even if it extends and deepens materially, is well within the equity buffer the earlier run-up in prices built in.

Third. The median mortgage holder has offset and redraw buffers covering more than one year of scheduled repayments at the 4.60% cash rate. That buffer is what keeps arrears contained even as serviceability tightens.

What the FSR says about investors specifically#

The investor-specific commentary in the FSR is worth highlighting because it is the chapter most landlord-focused coverage will skip. Three points stand out.

Investor arrears continue to run below owner-occupier arrears, consistent with the long-run pattern through previous downturns. Investor incomes are supported by rent growth of 5.7% over the year to August. The groups the Bank flags as thinner on buffer are recent buyers who paid near the February and March 2026 peak, high-LVR borrowers including participants in the Commonwealth 5% Deposit Scheme, and investors who bought at the top of the cycle.

A landlord who bought in the March quarter at close to peak with a sub-10% deposit is the archetypal exposure the Bank is naming. A landlord who held through the 2020-2024 run-up with a 20% or larger starting deposit is almost certainly outside the risk cohort on the Bank's modelling.

The CBA call: another 4 to 5 percentage points to go#

Commonwealth Bank economists updated their forecast on 30 September to a peak-to-trough decline of approximately 13% in Sydney and 12% in Melbourne from the respective capital peaks (CBA Newsroom, 30 September 2026). The bank's path assumes no further RBA hikes beyond 4.60% and two cuts in mid-2027.

On the September Cotality print, Sydney is already down close to 9% from its February peak and Melbourne is more than 7% off. The gap between where the national index sits today and where CBA has it landing is roughly another 4 to 5 percentage points of fall from here, before any 2027 recovery is modelled.

That is a tangible number for a landlord's December quarter balance sheet review. If CBA's path plays out, a Sydney holding currently valued at $1.5 million is forecast to settle around $1.4 million at the trough, roughly $65,000 below today's print and $200,000 below the February peak.

Rents, yield and the opposite-direction trade#

The equity side has been running one way all year. The cash flow side has been running the other.

National gross rental yield reached 3.79% in August 2026, the highest reading since September 2019 (Cotality Monthly Housing Chart Pack, September 2026). The September print, with values down a further 1.1% and rents continuing to grow, has pushed the mechanical yield number higher still.

The capital splits:

• Darwin gross yield 6.3% on the Cotality series.
• Hobart 4.4%.
• Perth approximately 3.9%.
• Melbourne approximately 4.0%.
• Canberra 4.3%.
• Sydney well below the national line, which is the historical pattern.

Rent growth of 5.7% over the year has added approximately $38 per week to the national median rent, and $200 per week on the five-year view since 2021. Vacancy sits at 1.9%, up from the record low of 1.5% in February 2026, but still well below the pre-COVID decade average of 3.3%.

For a landlord sizing a new acquisition on the current data, this is a materially better entry case on yield than any point in the last six years. For a landlord with the leveraged holding already on the balance sheet, the yield expansion is partially offsetting the equity compression. Partially, not fully.

What the two releases change for the next twelve months#

Put the two primary sources together and the landlord read for the balance of 2026 is roughly as follows.

The equity side is not finished falling. Six consecutive months of national falls, 97% suburb breadth, and the CBA target of a further 4 to 5 percentage points on the capital city composites. If you were planning to sell to crystallise equity, the window where that was easy closed in March. If you are holding through, assume another 12 to 18 months of index weakness before the Cotality series stabilises.

The leverage buffer is intact for most. The RBA's stress test, run on its own data, says the balance sheet holds another 20% of national fall before 5% of mortgages tip into negative equity. For a landlord who bought before the March 2026 peak with a 20% or larger starting deposit, the current cycle is a mark-to-market pain and not a solvency event.

The cash flow story is improving at the margin. Yield at 3.79% is better than at any point since 2019. Rents continue to grow at 5.7% annually. The counterweight is a 4.60% cash rate pushing variable investor rates toward 6.75% on the big four. The 1 January 2026 to 29 September 2026 move added approximately $454 a month to a $750,000 principal-and-interest investor loan (Canstar RBA cash rate September 2026).

The tax environment is tightening. The 12 May 2026 federal budget negative gearing and CGT carve-out applies from 1 July 2027. The ATO's Draft Taxation Ruling TR 2025/D1 on holiday and leisure facility deductions applies from 1 July 2026. The composition of the tax-adjusted holding cost on established stock has moved materially this calendar year.

The questions a landlord should be running at month end#

The October 1 Cotality and RBA FSR releases turn the following into live questions at the September quarter review.

1. Where does my LVR sit after a 5.2% national fall from peak? If I bought near the February or March 2026 peak with a sub-10% deposit, the honest answer is that I am closer to the 5% negative-equity tail the RBA names than I was a quarter ago. If I bought in 2020-2023 with a 20% or larger deposit, I am almost certainly outside the risk cohort on the Bank's modelling.
2. Where is my yield after the September print? A property that was yielding 3.5% on the March valuation is yielding closer to 3.7% on the September valuation at the same rent. If the September HVI drop has not been reflected in my internal cash flow model, it should be.
3. How much offset buffer do I actually have, in months of repayments at the current rate? The RBA's median borrower sits above twelve months. A landlord with less than six months of buffer on the investor loan is closer to the tail than they probably realise.
4. Which parts of the portfolio are leading the retreat? If the holding is upper-quartile Sydney or Melbourne stock, the drawdown is now double-digit on the Cotality chart pack. If it is second quartile or below, the fall has been milder.

Where Propkt fits#

Propkt is built to let an Australian landlord see the numbers behind the question, not the headline. The mortgage calculator runs the 4.60% cash rate scenarios on a nominated loan size at the current standard variable rate, and the investor expense tracker separates holding costs from capital works so the yield number you work from is the real one. The rent management side of the product plugs rent growth, vacancy and the lease renewal timing into the same view, so the yield side of the equation and the cost side land in one place at the end of each quarter.

Primary source links in full below. Nothing in this piece is tax, credit or investment advice. Speak to your mortgage broker, tax agent or licensed property adviser before changing anything on the back of a monthly index print.

Primary sources#

• Cotality, Australian housing values down for sixth straight month in September, 1 October 2026
• Cotality Monthly Housing Chart Pack, September 2026
• RBA media release mr-26-28, Release of Financial Stability Review, October 2026
• RBA Financial Stability Review, Resilience of Australian Households and Businesses, October 2026
• ABC News, Australian house prices fall for sixth straight month, 1 October 2026
• Commonwealth Bank Newsroom, Housing correction deepens, 30 September 2026
• Bloomberg, Australia's housing market slump deepens, 30 September 2026
• Canstar, RBA cash rate September 2026 hike 25bp, 29 September 2026