The Flow-On Effect for Business Owners
By Peter Biazos, Managing Director
Australia’s property market appears to be slowing, and falling property prices don’t just affect homeowners and investors.
For business owners who have traditionally relied on equity in their home or investment properties to support their businesses, this could have a flow-on effect.
Less equity means fewer people can borrow, reborrow or redraw into their account.
At the same time, interest rates are higher, so people’s borrowing capacity is already down. Loan applications are down, and approvals are down.
Source: https://www.abs.gov.au/statistics/economy/finance/lending-indicators/latest-release
Additionally, properties are staying on the market longer before they sell, and new stock isn’t necessarily coming onto the market either.
It seems that everything is grinding to a halt.
When the equity isn’t there anymore
For businesses experiencing cash flow pressure and carrying debt, access to equity has kept things going. They may have used money out of their own cash reserves or tried to access equity from their property. That’s getting harder now and losing access to that equity creates a problem.
And the problem is twofold. You have people who have only their matrimonial home, and you have people who own investment properties. If their mortgage repayments are going up and they see their property value coming down, the current market makes it hard to sell and unlock that equity. Rent prices will keep increasing which will also have a flow on effect on disposable income.
At the same time, creditor activity is increasing, and we’re seeing the ATO issuing a high number Director Penalty Notices and taking action against businesses.
Winding-up applications 2019 – 2026
Source: https://alares.com.au/insights/01-06-2026
The risk of negative equity
There’s also the issue of negative equity for people who bought property with a small deposit.
With the 5% deposit scheme, unit prices under a million dollars suddenly started going up. Demand was going through the roof.
The RBA data below shows that the share of first home buyers borrowing at LVRs of 90% or more increased sharply after the Australian Government expanded the 5% Deposit Scheme in October 2025.
Now, if property prices continue to fall, we could see another potential flow-on effect: people who got into the market with a 5% deposit could end up in negative equity.
It may take some time to filter through
From an insolvency perspective, we don’t anticipate a significant impact in the short term. It needs to filter into the economy a little bit more.
The impact is likely to become clearer as home owners start applying for loans and realise they’re getting knocked back or can only borrow less than they could a few months ago.
That will affect their ability to keep trading their business without that cash, and the question then becomes: can the company keep trading?
That’s where getting advice sooner rather than later becomes important.
Struggling business owners shouldn’t sit on their hands. They need to be proactive and seek advice from an insolvency practitioner or a trusted advisor.
What should accountants and lawyers be looking out for?
If a client comes to their accountant or lawyer and says, “I’m in a bit of strife and need to release some cash,” it’s time to consider their options.
Don’t necessarily rely on the big four banks.
There are other lenders out there who can assist. Obviously, we’re not talking about lenders of last resort, but second-tier lenders with slightly higher interest rates that may look at a borrower more favourably than a bank.
We’re also seeing more people relying on private lending.
You’ve got to be aware of the risk in going to lenders of last resort. If you’re seeing interest rates at 4% per month or equivalent, don’t jump in and sign up. Be wary of large establishment fees and the like.
We know that desperate situations can make people do things they probably would never have dreamed of doing.
People seem to be paralysed
Interestingly, we have seen a bit of a downturn in insolvency work in recent times which is due to various factors. That said, in recent weeks the enquiry and conversion rates have increased but I would call things “patchy”.
Maybe things are so bad that everyone’s a little bit paralysed.
For business owners facing these pressures, it’s about making the decisions you can with the information and data in front of you, and relying on a group of trusted advisers for that advice.
It’s not burying your head in the sand. It’s: “Okay, yep, this is a bumpy time. Let’s get all of the people in our corner to help us through.”
If you’ve got a client who is experiencing cash flow difficulties, you can reach out to us for a confidential discussion.