A Wave of Forced Selling Is Coming. Here's Your Three-Step Survival Guide.

The next two years are going to separate Australian property owners into two camps. One group will come through stronger, wealthier, and better positioned than they've ever been. The other will be forced to sell assets — potentially at the worst possible time — because they ran out of runway.

I'm Joey, and today I'm going to be blunt about something that most property commentators are either too polite or too conflicted to say plainly. A significant number of Australians are about to face a financial reckoning. Not because of a crash. Not because the market is fundamentally broken. But because their personal cash flow cannot sustain the holding costs that today's interest rate environment demands.

The market has already split into two groups. On one side are investors holding positively geared portfolios — properties where the rent covers the mortgage and then some. They're sleeping soundly. On the other side are people clinging to negatively geared assets, subsidising their investment from their salary every month, watching their offset account balance shrink, and wondering how much longer they can hold on.

Let me explain why the next 24 months will force a reckoning, and then give you three strategies — one for each financial position you might be in.

The fixed rate cliff has arrived

Cast your mind back to 2021. Interest rates were at historic lows. The RBA cash rate was 0.10%. Variable mortgage rates sat around 2.5%, and fixed rates? You could lock in 1.99% for two or three years. Some people locked 3% for four years in 2022, thinking they were being conservative 1.

Those fixed terms are now expiring. Every month, another cohort of borrowers rolls off their pandemic-era fixed rates and onto current variable rates of 6% or higher.

Let's do the maths on a typical scenario. A couple borrowed $700,000 at a fixed rate of 2.5% in 2021. Their monthly repayment on a principal-and-interest loan was approximately $2,800. Now they're on 6.3% variable. The new repayment: $4,340. That's an extra $1,540 per month — $18,500 per year — that they didn't budget for 2.

For families where both partners are working and expenses are already tight, an extra $1,500 per month is devastating. It's the difference between manageable and impossible. It's the kids' after-school activities, the annual holiday, the buffer that lets you absorb a car repair or medical bill.

And it's not just mortgages. Victoria's land tax has increased. Council rates are up. Insurance premiums have risen 15-20% across the board 3. The cost of holding property — any property — has gone up materially in every category simultaneously.

"For every dollar of interest rate increase, your borrowing power drops by roughly $75,000," says Joey Don. "But it's not just borrowing power. It's holding power. And holding power is what determines whether you're forced to sell at the bottom or hold through to the next upswing."

The cost-of-living double whammy

On top of the mortgage squeeze, everyday living costs are eating into whatever buffer families had left.

Groceries are up 7% year-on-year. Electricity is up 12%. Childcare costs have risen despite government subsidies. Private school fees continue their relentless 5-6% annual escalation. And fuel costs — while they've retreated from their 2022 peaks — remain elevated compared to pre-COVID norms 4.

For a household on $180,000 combined income (roughly $130,000 after tax), a $4,340 mortgage payment leaves $6,500 per month for everything else. Once you subtract rates, insurance, food, transport, childcare, utilities, and the minimum credit card payment, there's precious little left.

And here's the critical factor that most people miss: the offset account. If your offset balance is healthy — say $30,000-$50,000 — you have a buffer. The interest saving from the offset reduces your effective repayment, and the cash reserve gives you months of runway if something goes wrong.

But if your offset is empty? You're one car breakdown, one job loss, one medical emergency away from catastrophe. There's no buffer. There's no Plan B. There's just the decision about which asset to sell first — and by the time you're making that decision under pressure, you're almost certainly selling at a discount.

Strategy one: if your mortgage is crushing you — downsize or rentvest

This is the hardest advice to give, but someone needs to say it. If your monthly repayments exceed 35% of your after-tax income and your offset account is under $10,000, you need to act before the situation deteriorates further.

Option A: sell the large, expensive property and buy something smaller. If you're in a $1.2 million house with a $900,000 mortgage, your repayments at 6.3% are roughly $5,600 per month. Sell, buy a $700,000 property with a $400,000 mortgage (using the equity to reduce the loan), and your repayments drop to $2,500. You've just freed up $3,100 per month while retaining property ownership 2.

Option B: rentvesting. Sell the owner-occupied house, rent a modest apartment near your workplace, and use the equity to buy a lower-cost investment property in a high-yield suburb. The rental income covers the investment mortgage, you pay $500-$600 per week in rent for yourself (which is often less than your mortgage repayment was), and you maintain exposure to the property market without the crushing holding cost 5.

Rentvesting gets a bad rap from people who conflate property ownership with home ownership. They're not the same thing. Owning an investment property that generates positive cash flow while renting your own residence is often the financially optimal structure for young and middle-aged Australians. The emotional attachment to "owning your own home" costs people hundreds of thousands of dollars in opportunity cost over a lifetime.

The key metric: get your housing cost (mortgage or rent) below 30% of your after-tax income. Above 30%, everything else in your financial life gets compressed. Below 30%, you have room to breathe, save, and invest.

Strategy two: if your investment property is bleeding cash — cut it

This one is specifically for investors holding negatively geared properties that have been underperforming.

If you own an investment property that has been costing you more than the rental income covers — and the capital growth has been mediocre — for two or more consecutive years, it's time for a serious evaluation.

I know the psychology. You bought it for $750,000. It's now worth $720,000. Selling means crystallising a $30,000 loss (plus stamp duty, selling costs — call it a $70,000 total hit). Nobody wants to do that.

But here's the alternative: you continue subsidising a losing asset from your salary at $8,000-$12,000 per year, your offset account continues draining, your borrowing capacity continues shrinking, and in three years the property is worth $730,000 anyway because it was in a low-growth corridor to begin with.

The stop-loss logic from equity markets applies to property. If an asset isn't performing, the cost of holding exceeds the expected future return, and the capital deployed there prevents you from buying something better — sell it. Redeploy the cash into your offset account (to reduce your primary residence interest) or into a properly selected investment property in a high-yield, high-growth corridor 5.

We had a client last year holding a negatively geared townhouse in an inner-city pocket. It had gone sideways for four years. Rental yield: 2.8%. She was topping it up $900 per month from her salary. We helped her sell, reinvest the equity into a $680,000 house in the southeast with a granny flat generating $380/week. Net position went from negative $900/month to positive $200/month. Same capital, radically different cash flow.

"Stop-loss isn't just for stocks," says Joey Don. "If your investment property has been bleeding for two years and the fundamentals haven't changed, the property isn't going to magically fix itself. Cut it, redeploy, and move forward."

Strategy three: if you have cash — this is your decade

And then there's the third group. The people with healthy cash reserves, clean balance sheets, and borrowing capacity to spare.

If that's you — and I know some of you reading this are in this position — the next 12-24 months could be the most lucrative buying window since 2019.

Why? Because distressed sellers create pricing dislocations. When someone is forced to sell because they can't cover their mortgage, they don't have the luxury of holding out for the best price. They sell at whatever the market offers. For a cashed-up buyer with a pre-approved loan and the ability to move fast, these forced sales create opportunities to buy below intrinsic value.

Our team is already seeing this in the market. Properties that would have attracted 4-5 bidders 18 months ago are now selling with 1-2 genuine buyers. Agents are more receptive to pre-auction offers. Vendors are more willing to negotiate 5.

But — and this is critical — do not use this as an excuse to buy anything that's discounted. A bad property at a 10% discount is still a bad property. The discipline remains the same: buy land-rich houses on 500+ square metre blocks in suburbs with sub-2% vacancy rates, positive cash flow from day one, and development upside for the future 6.

And maintain a war chest. Keep at least 30% of your accessible capital in your offset account as a strategic reserve. This does two things: it reduces your interest bill on existing debt, and it ensures you can hold through any further rate increases without being forced into the same position as the sellers you're buying from.

"In property, cash flow is king," says Joey Don. "The people who survive cycles aren't the ones with the biggest portfolios. They're the ones with the strongest cash flow. Make sure that's you."

The forced selling wave is coming. Whether it's an opportunity or a catastrophe depends entirely on which side of the ledger you're standing on. Get your cash flow in order. Get your offset funded. And when the opportunities appear — and they will — move quickly and decisively.