First-home buyers who entered Sydney or Melbourne early this year could find themselves dangerously close to — or in — negative equity by December, particularly in Melbourne, under Commonwealth Bank's latest price forecasts.
CBA now tips Sydney dwelling prices to fall 6% across 2026 and Melbourne to decline 7% over the same period — revisions made in the wake of three consecutive cash rate rises and the federal government's housing tax reforms.
Both markets are expected to recover in 2027, supported by two anticipated RBA rate cuts, while Perth and Brisbane are forecast to power on with gains of 12% and 8% respectively by year's end.
Source: CBA Economic Insights, 3 June 2026.
CBA senior economist Trent Saunders (pictured left) said the budget changes had compounded an existing problem, Yahoo Finance reported.
"The tax changes have accelerated a slowdown that was already underway," Saunders said, pointing to higher interest rates, tighter financing conditions, and worsening sentiment as key turning points.
"Auction clearance rates have been falling since the RBA started its recent hiking cycle, price growth has continued to slow, and sales activity has softened. Tighter credit conditions are also likely to bring forward part of the adjustment by reducing borrowing capacity, particularly for investors," he said.
Canstar analysis of CBA's forecast illustrates the precarious position facing some recent buyers.
A first-home buyer who purchased a $1.5 million Sydney property — the maximum allowed under the federal Home Guarantee Scheme — with a 5% deposit at the start of 2026 would be left with just $2,377 in equity by December, after a year of principal and interest repayments. In Melbourne, the same scenario on a $950,000 property produces negative equity of $7,995, meaning the buyer would owe the bank more than the home is worth.
Sydney
Purchase price: $1,500,000
Equity at Dec 2026
$2,377
0.2% — barely above zero
Melbourne
Purchase price: $950,000
Equity at Dec 2026
−$7,995
−1% — negative equity
Perth
Purchase price: $850,000
Equity at Dec 2026
$154,347
16% — strong position
Source: Canstar.com.au. Based on an owner-occupier buying at the upper limit of the Home Guarantee Scheme on 1 January 2026, taking out a 30-year loan at the average new customer variable rate and making standard principal and interest repayments. Assumes mortgage rates do not change for the remainder of the year. Equity = value of property minus amount owing on mortgage.
Canstar data insights director Sally Tindall (pictured right) said the situation was particularly acute for those who had only recently managed to save a deposit.
"A buyer who purchased with a 5% deposit at the start of this year has very little buffer against falling property prices,” Tindall said. “If CBA's forecasts play out, some recent buyers in Melbourne could owe the bank more than their home is worth by the end of the year, despite making their mortgage repayments on time."
Tindall was clear that negative equity, while serious, is not an automatic crisis.
"Negative equity isn't necessarily a crisis if you plan to stay put and keep making repayments, but it can become a major problem if you're forced to sell or want to refinance," she said.
Tindall’s advice to anyone approaching that position was direct: "If you do find yourself in this position, don't panic. Instead, put your head down and keep your mortgage repayments up."
On the broader rate outlook, Tindall highlighted a deepening rift between the major lenders.
"What's particularly striking is how divided the banks have become on the outlook for interest rates,” she said. “While CBA is forecasting cuts next year, Westpac and NAB are both tipping a further hike, two in the case of Westpac. Borrowers should prepare for a range of scenarios rather than assuming rate relief is locked in."
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