Sydney Prices Fall 2026: Renovate Instead of Buying?
Sydney and Melbourne Prices Are Falling But Smart Homeowners Are Finding a Way Through
The latest data from Cotality tells a story that many borrowers are already feeling. While national home values edged up 0.7% in March 2026, Sydney and Melbourne are heading in the opposite direction. Since late November 2025, Melbourne values have dropped 0.9%, and Sydney is down 0.4%. The premium end, affluent suburbs, big-ticket family homes, is absorbing the biggest hits.
For most people, that sounds like bad news. But here's what we're seeing on the ground: homeowners who already own property aren't sitting still. They're doing something smarter.
The Problem With Buying Again Right Now
With the RBA cash rate now sitting at 4.10%, banks apply a serviceability buffer on top of that when assessing your loan. In practical terms, your loan gets stress-tested at close to 7% or above. That cuts borrowing capacity, often significantly. For a lot of existing homeowners, going out and buying a second property just doesn't stack up the way it would have two years ago.
And yet, the rental market is still extremely tight. Vacancy rates are hovering near record lows across most Australian cities. Rents are rising. Demand for housing, especially for independent living within the same block, has surged.
So where does that leave you if you want to grow your position without stretching your finances to the limit?
Using Equity the Right Way
If you bought your property a few years ago and values in your suburb held up reasonably well, you may be sitting on usable equity right now. That equity can be accessed through a renovation loan or construction loan, structured properly, to fund a granny flat build or a significant renovation that increases rental yield or resale value.
What Borrowers Need to Watch
Borrowing capacity is under pressure. With rates where they are, lenders are being cautious. Your borrowing power today is lower than it was in 2023, even if your income hasn't changed. That's just how the rate environment works.
Rental income can help. Most lenders will count a portion of the expected rental income from a granny flat when assessing your ability to service the loan. This is one of the key levers available to borrowers right now, and it's one that a good broker will know how to present correctly to a lender.
Ready to take the next step?
Whether you're thinking about a renovation loan, want to understand how much equity you can access, or want to know if a granny flat makes financial sense on your block, we're here to help.
For tailored advice or to talk through your options, contact Ask Financials today. Call us on 0433 944 055 or book a free consultation and let's look at your numbers together.
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