Updated 4 November 2026
Off the Plan Potential Problem #3: Market Value Drops
Explore CM Lawyers’ off-the-plan purchase service for contract advice and settlement support.
A falling valuation can change both the financial appeal of an off-the-plan purchase and the amount needed to settle. The practical task is to separate market risk, lending decisions and legal rights. A weaker market does not automatically rewrite the contract, but early advice can clarify the options before deadlines arrive.
Why can an off-the-plan property fall in value?
The price agreed before construction reflects expectations at that time. By completion, comparable sales, competing supply, borrowing costs and buyer demand may have changed. The finished apartment may also differ from expectations. None of these factors guarantees a fall, but a new building does not guarantee capital growth.
The NSW off-the-plan guide expressly warns that the completed property can be worth less than the agreed price. Assess the particular apartment, including size, layout and ongoing costs, rather than treating a suburb-wide trend as its valuation.
Does a lower valuation reduce the contract price?
Usually, no. A lender’s valuation and your purchase contract serve different purposes. A lower valuation does not automatically change the price you agreed to pay. Any contractual adjustment, negotiated reduction or legal remedy must have its own basis; disappointment about the market is not enough by itself.
Keep the signed contract, disclosure statement and variations together. Ask your solicitor to identify any relevant conditions before telling the developer you cannot proceed. A finance problem and a breach by the seller require separate analysis.
Is a price fall the same as negative equity?
No. Paying more than the property’s current value means you have suffered a fall relative to your purchase price. Negative equity means the debt secured against the property exceeds its value. A buyer with a substantial cash contribution can experience a price fall without being in negative equity.
MoneySmart’s investment-property guidance explains the risk of owing more than a property is worth. Selling also involves costs, so the amount left after repaying the loan can be less than the headline difference between value and debt.
How can falling value create a settlement shortfall?
A lender may assess the completed property below your contract price and offer a smaller loan than expected. You must then identify additional funds to complete, unless a valid contractual or legal right provides another outcome. The lender’s valuation policy and your repayment capacity both matter to the final amount.
The Reserve Bank’s explanation of apartment settlement risk describes this mechanism. That historical analysis explains how shortfalls arise; it is not a forecast for today’s market or a rule requiring every lender to use the same lending percentage.
What does a valuation shortfall look like in dollars?
Consider a hypothetical $1 million purchase with a $100,000 deposit already paid and an expected $800,000 loan. If the lender instead advances $720,000, another $180,000 is needed towards the price at settlement. That is $80,000 more than originally planned, before duty, fees and other transaction costs.
These figures illustrate an assumed reduction, not a lending rule or predicted loss. Prepare the same calculation using your actual contract, deposit receipts and written lending advice. Keep purchase costs separate so they are not accidentally counted as available equity.
How should you assess value before exchange?
Compare recent sales of genuinely similar properties and understand the proposed apartment’s size, floor, outlook, parking, finishes and strata costs. Consider independent valuation advice where appropriate. An agent’s estimate, developer’s price list or online suburb median is not a guarantee of what a lender or future buyer will pay.
Check whether comparison prices include incentives or materially different features. NSW investment guidance warns about unreliable growth evidence and sales pressure. Keep dated copies of the information relied on and ask who prepared it and for what purpose.
How much financial flexibility should you allow?
Build a budget that can accommodate a lower loan offer, delayed completion and the costs of owning the property. There is no universal buffer suitable for every buyer. Identify money that will actually be available when needed, rather than relying on an expected bonus, sale price or future refinance.
My practical advice is to test an uncomfortable outcome before signing. If the purchase only works when prices rise, reconsider the assumptions. Borrowing to invest increases exposure because repayments and other commitments continue even when an investment performs poorly.
Will pre-approval protect you from a later shortfall?
No. Pre-approval is conditional and may expire long before an off-the-plan development finishes. The lender can assess the completed property and your circumstances before final approval. Ask what remains outstanding, when approval must be renewed and how changes to income, debts or the development could affect the application.
MoneySmart explains that pre-approval is not a loan guarantee. Update your lender or broker when the timetable changes. Do not assume that a preliminary assessment obtained at exchange will still support the same borrowing amount years later.
Can you negotiate a lower price or more time?
You can ask, but the seller does not have to agree merely because the market has weakened. A negotiated reduction, extension or incentive should be documented properly and disclosed to the lender. Consider whether it resolves the actual funding gap, rather than simply making the offer appear more attractive.
Ask your solicitor to record the revised price or deadline, any interest or fees, and whether existing rights are preserved or released. Verbal reassurance from a salesperson is not a reliable substitute for an agreed contractual variation.
What cancellation rights should be checked?
Check any remaining cooling-off right, an express contract condition, a relevant disclosure problem or an available sunset right. Residential off-the-plan contracts generally have ten business days to cool off, subject to waiver and exceptions. Withdrawal during that period ordinarily forfeits 0.25% of the price; later cancellation requires another basis.
The Registrar General’s guidance explains conditional remedies for material changes and missing disclosure documents. Those protections have specific tests and deadlines. A general market fall is not itself a material change to the disclosed property or an entitlement to compensation.
What if you were promised guaranteed growth?
Preserve the exact statement, who made it, when it was made and the material you relied on. Misleading representations may support legal remedies, but a disappointing result alone does not prove misconduct. Predictions made in trade or commerce require reasonable grounds when made, with their context and qualifications considered.
ACCC guidance on future claims explains this distinction. Ask a lawyer to assess the representation, reliance and resulting loss. Do not withhold settlement or assume a refund is available simply because promotional forecasts did not eventuate.
Could default cost more than the deposit?
Yes. Depending on the contract and valid enforcement steps, a seller may retain or recover the deposit and pursue additional damages, interest and costs. A lower resale price can increase the dispute’s financial stakes. Liability depends on the terms, proven loss, applicable credits and reasonable steps to reduce loss.
A deposit is not an agreed exit fee unless the contract actually provides that outcome. Forward any completion or default notice to your solicitor immediately. The notice’s validity and deadline require checking; ignoring it can narrow the available options.
What does a real falling-market case demonstrate?
In STM123 No. 16 Pty Ltd v Wang [2025] NSWSC 444, an off-the-plan Point Piper apartment was contracted for $16.5 million. The buyer failed to pay the second deposit instalment and comply with completion notices. After termination, the apartment eventually resold for $12.82 million, leading to substantial further liability.
On 7 May 2025, Pike J assessed further damages at $2,425,534.54, including prejudgment interest, plus costs. The calculation credited the full $1.65 million deposit, including the unpaid instalment already covered by an earlier judgment. The buyer did not participate in the damages hearing.
The Court accepted the later resale price on the particular valuation and marketing evidence. This was not an automatic rule for every resale. The reasons do not establish that finance refusal caused the default; the lesson is that walking away in a falling market can expose a buyer beyond money already paid.
Should you automatically sell after settling at a loss?
No single response suits every buyer. Assess affordability, rental prospects, ongoing expenses, debt and the costs of selling before deciding whether to hold or sell. Waiting does not guarantee recovery, while selling can crystallise losses. Obtain advice based on your own finances and the property’s current position.
Separate the original purchase decision from today’s choices. MoneySmart lists ownership and sale costs that affect the comparison. If repayments are becoming difficult, contact the lender early rather than relying on an assumed market rebound to resolve the problem.
How can CM Lawyers help assess your options?
Bring the contract, disclosure documents, lending correspondence, valuation information and any notices to CM Lawyers’ off-the-plan service. We can review contractual obligations, relevant statutory protections and proposed negotiations. A lender or qualified financial adviser should assess borrowing and affordability alongside the legal review, so the decisions fit together.
I would establish the next enforceable deadline first, then compare realistic options. To arrange advice, contact CM Lawyers on (02) 9557 9000 or lawyers@cmlaw.com.au. Act before a funding concern becomes an unanswered default notice.
General information for NSW readers, current at 4 November 2026. Obtain advice about your contract, funding and individual circumstances.
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