Experts downplay negative equity risks for first-home buyers despite Liberal warnings

CBA economists recently predicted housing values in Sydney and Melbourne could fall 6–7% in 2026, prompting warnings from Liberal MPs that first-home buyers leveraged under the government's 5% deposit guarantee scheme could face negative equity. However, property data from Cotality shows that price declines are largely concentrated in the top quartile of the market, while the bottom 25% — where first-home buyers are most likely to purchase — saw values rise 0.4% in Sydney and fall only 0.2% in Melbourne in the three months to May. Cotality's head of research Gerard Burg acknowledged that buyers who purchased near the recently raised $1.5 million Sydney price cap on a 5% deposit could be at risk, but stressed that negative equity only becomes a serious problem if homeowners are forced to sell. REA Group senior economist Angus Moore confirmed that price falls have so far been concentrated in expensive suburbs like Sydney and Melbourne's eastern areas, not typical first-home buyer territory. Moore also flagged that proposed changes to capital gains tax and negative gearing could reduce investor activity and put additional downward pressure on prices. Both economists pointed to low unemployment and low mortgage arrears rates as key buffers against widespread distress, though they noted negative equity can still constrain options for refinancing or moving.