More than 250,000 Australians who recently entered the property market are being warned they could face financial pressure as house prices continue to decline.

Analysts say many first-home buyers who purchased homes with low-deposit government-backed loans are at risk of falling into negative equity, where the value of their home drops below the amount they still owe on their mortgage.

Forecasts suggest house prices could fall by as much as 7% in Sydney and 8% in Melbourne, leaving some homeowners unable to refinance or access additional credit.

Economists say the downturn is being driven by a combination of tax policy changes, high interest rates and weakening market confidence.

While lower prices may improve affordability for future buyers, experts warn recent purchasers could face significant financial challenges if the market continues to soften.