Gear that is lower than the level you are being down levelled to is also being down levelled as if it matched your level. For example I am lvl 42, in a lvl28 area, have lvl 14 chest with +8 power and 35 defence.
Stats without it are (naked chest):
Power: 231
Attack: 450
Armour: 301
Stats with it:
Power: 236
Attack: 455
Armour: 324
If I goto a zone of my level the stats are:
Without it (naked chest):
Power: 408
Attack: 720
Armour: 505
With it:
Power: 416
Attack: 728
Armour: 540
This piece of armour is LOWER than the level I am being down levelled to. I also tested this with other equipment LOWER than the level I am being down levelled to with the same result.
It appears that regardless of the level of your gear, the gear stats are being brought down the same amount as your characters level when down levelled. Which means for characters who do not have gear that closely matches their level, they are worse off when down levelled than characters whose level match the areas level, with the same gear.