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

New data from property research firm Cotality shows that price declines in Sydney and Melbourne are largely confined to the top 25% of the market, while the cheapest dwellings — where first-home buyers typically purchase — rose 0.4% in Sydney and fell only 0.2% in Melbourne in the three months to May. This has led housing economists to push back against alarm raised by Liberal MPs, including Andrew Hastie, who warned that buyers leveraged 'up to their eyeballs' under the government's 5% deposit guarantee scheme face negative equity. Cotality's head of research Gerard Burg acknowledged that buyers who purchased near the recently raised $1.5 million Sydney price cap under the scheme at peak prices remain at some risk, but stressed that negative equity is only a crisis if homeowners are compelled to sell. REA Group senior economist Angus Moore echoed this view, noting that price falls have so far been concentrated in expensive eastern suburbs — not typical first-home buyer territory. Moore also flagged that proposed changes to capital gains tax and negative gearing in the recent federal budget could dampen 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 Moore noted that negative equity can still constrain options for refinancing or moving even when repayments are being met.