Just 6% of first-timers who bought in 2007 remain in negative equity, compared to 15% just one year ago.
Falling house prices meant that by late 2008 three in five buyers were in negative equity, as the average home value fell by £30,000.
Around 364,000 houses were sold to first-time buyers in 2007, according to the Council of Mortgage Lenders.
Nigel Stockton, financial services director of Countrywide, said: “Despite the largest fall in house prices for 25 years, across most of the country the number of first-time buyers who bought at the peak of the market and still find themselves in negative equity is low, which is good news.
“For the average household in Southern England homeownership has proved to be a solid investment even over a period where house prices have fallen.”
Negative equity is more of a problem in the North East where it still affects 53% of first-time buyers.
Stockton added: “In parts of Northern England the story is different and a significant number of first-time buyers still find themselves in negative equity.
“While the number of homeowners in negative equity is falling, it is doing so at a much slower pace than compared to the south of the country, with negative equity reduced though mortgage repayments rather than house price growth. If the current trend continues it could be five years before negative equity loosens its grip on first-time sellers in parts of Northern England.”