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The Albanese government\u2019s expanded first-home buyer support has helped many buyers get into the market with small deposits.<\/p>\n
First-home buyers who used the Albanese government\u2019s flagship housing support scheme in key capital city areas have been warned there is a high chance they\u2019re repaying a mortgage worth more than their home.<\/p>\n
Explosive figures have revealed two in five Sydney properties eligible for the government\u2019s 5 per cent deposit scheme have had value falls exceeding 5 per cent since the program\u2019s expansion in October.<\/p>\n
Negative equity risk was even higher in Melbourne<\/a>, where close to half the properties eligible for the scheme recorded price drops, while in Brisbane it was close to a quarter of properties<\/a>.<\/p>\n These price falls would be particularly devastating for anyone who bought using the Australian Government 5 per cent Deposit Scheme, as the drop in value would wipe out their deposit, putting them into negative equity.<\/p>\n This home in Sydney suburb Fairfield recently sold for $1.45m, just under the Sydney cap. Dwellings in the city region have fallen in value by an average of 8.1 per cent since October.<\/p>\n It would also mean taxpayers would be on the hook for covering higher losses incurred by lenders in cases where first-home buyers defaulted on their loans \u2013 something that\u2019s rarely happened under the scheme to date.<\/p>\n The findings come from a study by property research group SuburbData, which examined all properties selling below the scheme price caps in each capital since the government program was expanded in October. <\/p>\n Properties priced below the new $1.5m price cap in Sydney had some of the largest value falls between October 2025 and August 2026, the SuburbData analysis showed.<\/p>\n An estimated 41.9 per cent of all properties below this price cap lost more than 5 per cent of their value, with the average loss at about $83,000 per property.<\/p>\n SuburbData analyst Jeremy Sheppard said value falls of this magnitude would be problematic for those who used smaller deposits due to the current climate of rising interest rates pressuring household budgets.<\/p>\n With markets expecting an 86 per cent chance of an interest rate hike next week Tuesday and lenders warning of a strong likelihood of two more hikes after that, mortgage holders face steep rises in repayments.<\/p>\n Those who used smaller deposits would get a bigger hit as they held more debt and were usually already charged higher lending rates, Mr Sheppard noted.<\/p>\n \u201cIt\u2019s the worst time if you\u2019re in negative equity. You need to cut spending and make sure you don\u2019t sell. Do everything you can to stay in the market,\u201d he said.<\/p>\n \u201cMy concern is that people who are on the scheme who are vulnerable, people who have lost their jobs, have limited options.\u201d <\/p>\n A criticism of the policy is that it initially pushed up demand for housing in the lower end of the market, only for prices to then fall. Picture: Jane Dempster<\/p>\n Canstar data insights director Sally Tindall said there has been a surge in borrowers getting into the housing market \u201cwith barely any skin in the game\u201d.<\/p>\n She noted $15 billion in owner occupier mortgages had been written with deposits of 5 per cent since the scheme was uncapped in October.<\/p>\n \u201cBuying with a 5 per cent deposit can get you through the front door, but it doesn\u2019t give you much of a safety net once you\u2019re inside,\u201d she said.<\/p>\n \u201cMany of these borrowers, particularly in Sydney and Melbourne, are likely to be in negative equity.\u201d<\/p>\n Government downplayed the negative equity risk, with a spokesman for Housing Minister Clare O\u2019Neil pointing out only 15 claims had been paid out of more than 200,000 guarantees since the scheme\u2019s inception.<\/p>\n MORE: Silent $16.6b worry behind record reno spending<\/a><\/p>\n Canstar data insights director Sally Tindall said the number of borrowers with small deposits was well up on previous years. Picture: Tim Hunter.<\/p>\n \u201cThat\u2019s less than 0.01 per cent,\u201d he said. \u201cNo guarantees have been paid out for people who entered the scheme since its expansion last year.<\/p>\n Labor 5 per cent Deposit Scheme had helped 280,000 first-home buyers get into their own home, saving $2.3 billion in lender\u2019s mortgage insurance costs, according to Ms O\u2019Neil\u2019s office.<\/p>\n \u201cWithout the scheme, many first-home buyers would not have got into the market at all,\u201d the spokesman said. <\/p>\n Housing Australia data showed 59 per cent of scheme users since its 2020 inception used deposits larger than 5 per cent.<\/p>\n Shadow Housing Minister Andrew Bragg blasted Labor\u2019s decision to expand the scheme in October, pushing up housing demand, only to then introduce tax changes in the budget that caused prices to fall.<\/p>\n Minister for Housing Clare O\u2019Neil\u2019s office revealed only a fractional number of the guarantees have ever had to be paid out. Picture: Martin Ollman<\/p>\n \u201cThey were warned about price hikes and negative equity but they charged ahead anyway,\u201d he said.<\/p>\n Senator Bragg added that 95 per cent mortgages were \u201cpedalled\u201d without any disclosure of coming tax reforms that would impact the housing market such as changes to negative gearing.<\/p>\n \u201cLabor has smashed the housing system,\u201d he said.<\/p>\n NEGATIVE EQUITY HOT SPOTS<\/p>\n One of the Sydney areas with the highest volume of losses was the Strathfield-Burwood-Ashfield region of the inner west, SuburbData indicated.<\/p>\n A total 676 homes in the area traded within the price cap, with the average value falling by $122,000, or 15 per cent.<\/p>\n MORE: See top negative equity suburbs in Brisbane<\/a><\/p>\n<\/p>\n
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