Till Debt Do Us Apart: Why Property is No Longer the Prize in Divorce

For decades, the family home has been the crown jewel of divorce settlements. It wasn’t just a house - it was a symbol of emotional security, future wealth and social status. It is often the most fiercely contested asset, a battle for both heart and wallet.

But now, that narrative is shifting.

Despite some recent interest rate cuts, borrowing costs remain stubbornly high compared to what property owners have been used to. With property values fluctuating and rising tax burdens, the decision to hold onto property in a divorce has become increasingly complex.

A New Era of Financial Caution

The Reserve Bank of Australia’s aggressive rate hikes since 2022, and only modest rate cuts since, have left many homeowners and investors grappling with repayments that are significantly higher than they budgeted for. As economist Saul Eslake noted recently, “Even with slight rate relief, we’re a long way from the low-interest environment people grew accustomed to. Debt is more expensive now, and it’s staying that way.”

This shift is redefining divorce settlements. Where once a spouse might have fought tooth and nail to retain the marital home or investment property, the conversation has changed. Now, it’s not can I keep this? but can I afford to keep this?

The answer? Increasingly, is a renowned no.

From Trophy Asset to Financial Burden

Real estate still holds emotional value but in the cold, rational world of post-separation financial planning, sentiment is taking a back seat to solvency.

Today’s property owners face a triple squeeze:

• Mortgage repayments remain high, even after slight downward movements in the cash rate.

• Land tax liabilities are escalating, particularly in states like Victoria, where legislative reforms have expanded tax brackets and surcharge rates.

• Property values are unpredictable. Some regions have rebounded; others remain stagnant or declining, leaving owners exposed.

The Tax Shift Reshaping Family Law Settlements

Recent tax reforms have further blurred the picture. As The Australian Financial Review reported, rising land tax surcharges and foreign owner levies are reshaping investment behaviour across the country. Investors are divesting. Owner-occupiers are recalibrating. And for separating couples, holding onto property may no longer the obvious choice.

For family lawyers, this is a call to action: the role of advisor has expanded. It’s no longer just about asset division; it’s about comprehensive financial planning, tax modelling, debt servicing and long-term cashflow strategies.

Get It Right from the Start

A leading lawyer in the family law space shared that family lawyers are now playing a more complex advisory role. It's no longer just about splitting assets; it’s about strategic financial planning. In today’s high-stakes environment, guessing your way through a settlement is risky. That’s why bringing in specialists early is essential:

• Property valuers who understand family law nuances and court requirements.

• Tax advisors who can model short and long term liabilities.

• Mortgage brokers or loan specialists who can assess refinance capacity under real-world conditions.

• Financial planners who can provide a holistic picture of risk tolerance and asset viability.

The Vital Role of the Specialist Family Law Valuer

In today’s market, clients are increasingly seeking accurate property valuations, not only to establish a reserve price for potential sale, but to understand what the property might realistically achieve in the current conditions.

A reliable valuation goes beyond just assigning a figure. It involves assessing the key factors that influence what a prospective buyer may be willing to pay, including:

• The property's current condition, including any visible or structural issues

• Necessary repairs or deferred maintenance, which can deter buyers or reduce offers

• Potential for upgrades or improvements, and whether these add tangible value

• Presentation and marketability, including layout, street appeal, and comparable listings in the area

• Local market trends, buyer demand, and regional economic conditions

As family law specialist property valuers, we are expected to deliver more than just a market estimate. Our role is to ensure valuations are tailored to meet family law and court standards, offering clients an objective, clear understanding of the property’s strengths, weaknesses, and financial viability (SWOT Analysis). Whether for negotiation, settlement, or sale, this critical insight is necessary for determining whether retaining the property is financially sustainable or if selling is the more strategic option for our clients.

The Smarter Path Forward

Property will always be emotionally charged in family law. It represents safety, continuity for children, and identity. But clinging to outdated assumptions about its value or manageability can lead to costly mistakes.

If you're advising a client going through separation, make sure they:

• Stress-test their ability to hold the property under different interest rate scenarios.

• Understand tax consequences at both state and federal levels, including potential capital gains and land tax exposure.

• Evaluate liquidity in a world of high repayments, cash flow matters more than ever.

• Engage the right experts early, rather than reactively when problems arise.

In this evolving landscape, the question isn’t just who gets the house? It’s who can actually afford to keep it?

Because when the romance ends and the spreadsheets begin, the real winner in a family law settlement is the party who walks away with a sustainable financial future, not just a Title Deed.