Home borrowers who live in a suburb with a glut of new apartments or off-plan housing developments are most at risk of falling into negative equity.
Digital Finance Analytics founder Martin North has released a damning new report detailing how Australians forced into selling their property could end up owing more than their home was worth.
Home owners who took out a mortgage in certain suburbs of Sydney or Melbourne after 2017, or parts of Perth during the past five years are most susceptible.
Home borrowers who live in a suburb with a glut of new apartments or project houses on small blocks are most at risk of falling into negative equity (pictured is Little Bay in Sydney's south-east)
The Reserve Bank of Australia estimates that three per cent of borrowers Australia-wide are in negative equity, following a record downturn in real estate values.
Mr North, an economist with 35 years' experience, calculates it's more like 10 per cent, or 400,000 borrowers.
'If you're in negative equity, it means that the value of your mortgage is bigger than the value of your property, then you've got the psychological confidence question as well,' he told Daily Mail Australia on Thursday.
'Remember, that prices are still sliding more and the point that people need to understand is that as prices slide, what erodes first is your equity in the property, the deposit you put in.
'Basically, you lose first. If you have a 10 per cent deposit on a property, and prices drop 10 per cent you're blown out completely: you've still got the mortgage but you've got no equity.'
Sydney has some of Australia's worst negative equity, with median house prices across the city plunging by a record 16 per cent, or $169,146, since peaking in July 2017, CoreLogic data showed.
The ANZ bank is forecasting more pain to come, and is predicting house price falls of 20 per cent.
Mr North is even more pessimistic, predicting a 50 per cent drop in median apartment prices in some parts of Sydney where there's an oversupply.
Campbelltown (pictured), in the city's south-west, had Sydney's worst negative equity with 4,747 borrowers in this area affected
Sydney has some of Australia's worst negative equity, with median house prices across the city plunging by a record 16 per cent, or $169,146, since peaking in July 2017.
Campbelltown, in the city's south-west, had Sydney's worst negative equity with 4,747 borrowers in this area affected.
'It's people who bought within the last two years, when the people were persuaded to buy close to the peak, quite a lot of these were home-land packages in the new suburbs on the outskirts of town,' Mr North said.
The city's north-west, including Kellyville and Rouse Hill, also had a high rate of negative equity with 3,931 borrowers affected in these areas of the Hills district.
The nightmare scenario wasn't confined to outer suburbs with 2,525 borrowers affected in Sydney's south-east, stretching from Little Bay to Eastgardens, Maroubra and Malabar, which is home to a sewage treatment plant.
In Melbourne another suburb with that deals with effluent, Werribee, is dealing with the stench of negative equity,
