Fresh analysis has revealed the number of first home buyers with 5 per cent Deposit Scheme home loans currently in negative equity.
New analysis from REA Group has found that just 87 first home buyer (FHB) households who purchased under the expanded 5 per cent Deposit Scheme are currently in negative equity.
This represents less than 0.2 per cent of the approximately 48,000 properties bought through the program since October 2025.
The analysis, which combines Housing Australia data with PropTrack’s Home Price Index, revealed that most FHBs who entered the market with a 5 per cent deposit after the scheme’s expansion have retained positive equity despite falling property values nationwide.
REA Group said FHBs typically purchased more affordable homes, including in regional markets, where price growth has remained stronger than in more expensive metropolitan areas.
Queensland – Outback recorded the highest estimated equity level among scheme buyers, at 14.2 per cent, while Western Australia – Outback followed at 12.7 per cent, ahead of South Australia – Outback at 12.2 per cent.
At the other end of the market, Sydney – Eastern Suburbs recorded the lowest equity position, at 0.8 per cent, followed by Melbourne – Inner East at 1.9 per cent and Mornington Peninsula at 2 per cent.
Small cohort, thin buffers
Negative equity occurs when a property’s value falls below the outstanding mortgage balance. It does not necessarily mean a borrower is in arrears or will sell at a loss, but it can restrict refinancing options and poses a risk if a household must sell while prices remain lower.
Yet REA Group stressed that the current negative-equity cohort was small and that recent purchasers were unlikely to need to sell in the short term.
However, the analysis revealed that a widening group has increasingly limited equity protection, with 48 per cent of FHB households using the scheme having an equity position of 5 per cent or less – meaning the value of their property is at or below the amount originally contributed as a deposit.
REA outlined that further price falls could erode this cohort’s remaining buffers, particularly for those who bought recently and had not yet repaid much principal.
The remaining 52 per cent of scheme users have equity of more than 5 per cent, and REA said that price growth in more affordable and regional areas had helped shield many low-deposit purchasers from the price declines seen in other markets.
Buyers wait for lower prices
Finconnex Financial director and mortgage broker Bishnu Aryal said a growing number of prospective buyers were responding to the market downturn by postponing a purchase, even after receiving finance approval.
“We’re seeing buyers who have finance approved and are ready to purchase, but they’re choosing not to because they believe prices have much further to fall,” Aryal said.
“They’re not waiting because they can’t buy. They’re waiting because they think they’ll get a much better deal if they’re patient.”
He said some buyers were anticipating particularly large price falls over the coming six months.
“Some people genuinely believe they’ll be able to buy the same property six months from now for $150,000 or $200,000 less,” he said.
“A year ago, buyers were mainly asking whether they could afford the repayments. Now many are asking ‘Why would I buy today if prices are going to be cheaper in six months?’”
Aryal cited a young Sydney FHB couple who withdrew from purchasing a $1.2 million house after expecting values to fall by another 15–20 per cent.
“They decided to walk away because they thought they would be able to buy the same property for much less if they delayed,” he said.
[Related: Amount of 5% deposit properties converted to investments revealed]
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