New realestate.com.au research shows almost half of buyers who used the federal 5% Deposit Scheme since October 2025 hold thin equity, though genuine negative equity remains rare. Here's what the numbers mean for first home buyers.
New research from realestate.com.au has found that almost half of first home buyers who used the federal 5% Deposit Scheme since October 2025 now hold less equity in their home than the deposit they put in, raising the question of what that actually means if prices keep softening. The headline number sounds alarming, but the detail behind it tells a more reassuring story for most buyers who plan to stay put.
The analysis, from realestate.com.au economist Luc Redman, combines Housing Australia data with PropTrack's Home Price Index. It found that 48% of first home buyer households who purchased under the expanded 5% Deposit Scheme since October 2025 live in regions where current estimated equity has fallen to 5% or less, meaning a sale today could leave them with less than they put in as a deposit.
The actual number of households in genuine negative equity right now is far smaller. Of approximately 48,000 properties purchased through the scheme since October 2025, only 87 households, less than 0.2% of the total, are currently in negative equity. The gap between the 48% "at risk" figure and the 0.2% actually affected comes down to one thing: most of these buyers are not selling. Negative or thin equity only becomes a real problem if you need to sell, refinance, or the bank forces a revaluation.
Equity positions vary sharply by location. Sydney's Eastern Suburbs recorded the lowest estimated equity for scheme buyers at around 0.8%, followed by Melbourne's Inner East at roughly 1.9% and the Mornington Peninsula at about 2%. These are markets where prices have cooled the most since buyers entered with a low deposit.
A 5% deposit gives a buyer a much thinner equity buffer from day one, so even a modest price pull-back can tip the numbers below the original deposit amount on paper. That is a mechanical result of starting with less equity, not evidence that low-deposit buyers made a worse decision. The broader housing downturn has added to the effect: Cotality's national index recorded its largest monthly fall since December 2022 in July, with the softening now reaching well beyond Sydney and Melbourne into regional markets that had previously held up.
If you already own a home through a low-deposit scheme, thin equity on paper generally will not affect you as long as you can keep making repayments. It becomes relevant mainly if your circumstances change unexpectedly, such as needing to sell within a few years of buying. If you are still weighing up whether to use a low-deposit scheme now, this data is a useful reality check rather than a reason to rule it out.
Use these tools to see how a low-deposit purchase and current market conditions could apply to you: