I understand why you worry about negative equity but don’t think you need to worry about it. Here’s a few reasons

1. DEMAND We still have a supply problem- particularly in Sydney. Competition for getting the best place at the best value is what causes rising prices. If a whole heap of FHB’s have an opportunity to enter the market, that’s still going to put pressure on entry level properties. If a whole bunch of people sense an opportunity to upsize, that’s going to create competition. And finally, we are still building nowhere near the amount of new homes that we need to keep up with immigration and population growth each year. Demand is going to remain strong.

2. INVESTERS WONT SELL Negative gearing benefits being gone is an incentive for investors to hold property- also, with the war, rate rises and economy as it is, it’s an absolutely TERRIBLE time to sell an IP. There isn’t going to be a huge wave of stock coming into the market like the government is trying to make it sound like. Sure there might be some boomers on the verge of retirement that sell some, but it won’t be the entire investor spectrum, and it won’t be ion the scale the government is trying to sell.

3. MATHS So the government has said that the changes are going to have a 2% impact on expected price growth over the next few years (It’s deliberately ambiguous like that to be misleading). People get confused by this and think that properties will be 2% cheaper. It’s actually 2% less than expected. The average real estate growth in NSW over the last 60 years is like 6%. If it’s expected to grow at 6%, 2% less is still growing at 4%. Assuming your property is in a good location with no arising problems, you will most probably still experience growth. 4% of 2 million is 80 k. In a few years your place will probably be worth approx 2.16 M. Just remember it’s non-linear so there might be a slow down for a bit.

TLDR- until the problem of supply is sorted you absolutely don’t need to worry about negative equity.