ScoMo admits property lobby behind FHB deposit subsidy

By Leith van Onselen

Prime Minister Scott Morrison this morning admitted that its first home buyer (FHB) deposit scheme, which has been matched by Labor, will drive house prices up. He also admitted that Australia’s property lobby is behind the policy. From The AFR:

Mr Morrison rejected suggestions the plan announced on Sunday, and quickly matched by Labor was a taxpayer-funded subsidy and said it won’t lead to an increased risk of purchasers getting into financial trouble.

“It enables them to open the door and actually turn the key on their first house,” Mr Morrison said.

“In a couple of years they will undoubtedly refinance and they will go through that process again. The equity in their home will build and they’re up, up and away. That’s where we want to get them to”…

Asked what modelling had been done, Mr Frydenberg said the government “had spoken to people in the sector.”

Fancy that: another fake ‘affordability’ policy written by the property lobby, and designed specifically to drive-up demand and prices.

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Comments

  1. It will bring forward future purchases by FHBs, but at great risk of negative equity.

    Then what? A slump as FHBs dry up in a year or two?
    And it’s not of sufficient scale to really reverse 10% pa drops, just slow it down.

    It’s hard to see this significantly moving the credit impuls, so it won’t work. Borrowers still have to meet the 7% repayment threshold. And sentiment will be hard to turn around now.

    • DominicMEMBER

      No mate. Scummo cares … he really does.

      He just wants to look after the little guy.

      Excuse me … I’m getting all choked up.

      Hang on a sec … those are not tears … it’s vomit!

    • Strange Economics

      Yeah, Genworth etc’s business model is gone…
      Back to I/O loans soon..

      Finally the Liberal Govt proposes a new Nationalised bank…
      Save the Property market by sucking in more low deposit low income buyers…
      As he said – “we don’t want prices to go down”…

    • FHBs already have stamp duty exemptions helping them, yet prices are still heading down. If that $40-$50k gift isn’t helping, then I don’t know if lowering the deposit amount will really help them either? I only really hope it helps in the segment of $500-600K homes or lower. Above that stamp duty kicks in and I somewhat hope they won’t be competing with me (looking in the $700-$850k range). But I’d rather purchase in the under $700k range to take advantage of the stamp duty exemptions.

      • How does this work exactly? Does the government go as guarantor putting tax payer money as collateral?
        What happens when they go into negative equity which is a real possibility or they never get the chance to refinance?
        Or are they lending the extra 15% as a shared equity and if so what are the rates and terms of that loan?

        Also a lot of first home buyers all already doing this with their parents going as guarantor.
        Only 5% deposit is needed with a signature from mum and dad putting their house up as collateral, and your done.
        In 50% of case the parent give them the deposit as well; $90k on average.

  2. “That’s where we want to get them”
    Has there ever been a more explicit acknowledgment that the whole ponzi, infinite growth scheme is government sponsored?

    • Australia is blessed with vast natural resources, the biggest of which is a bottomless pit of stupidity we can mine forever

      • Considering that the book ‘The lucky country’ was written nearly 60 years ago, not much has changed, so forever might be the case if our second rate politicians carry on being stupid and we carry on being ‘lucky’.

    • According to Rate City, buying a $500,000 property with a 5% deposit instead of 20% will cost an extra $58,774 over the life of a 30-year loan.

      Nothing quite like making housing more affordable

  3. FHB aren’t going to save the market, they may give support to the lower end but regardless its all about credit and thats the biggest change and i believe it will only be available to 10,000 borrowers.

  4. Those old enough will remember what happened to the airline that used the “up, up and away” slogan.

    • Mark HeydonMEMBER

      Privatised and ultimately became part of Qantas?
      (Are you mixing up TAA’s old slogan with Ansett?)

  5. Scott Morrison National Manager of Research and Policy for the Property Council of Australia from the age of 21 to 26.

    21.

    Geez, if that doesn’t set off any alarms in your mind then you’re kidding yourself. You have been captured by the Australian housing cult. Your mantra is….. defend house prices, defend house prices, defend house prices.

  6. proofreadersMEMBER

    Ah – so, was this what that secret love-in meeting that ScMo had with the property lobby (to the exclusion of all other stakeholders) in Canberra a couple of months ago, was about?

    • Mark HeydonMEMBER

      Doubtful. Given the detail in this policy they can’t have dreamt it up much earlier than last Friday.

  7. Completely admitting that the only way their scheme works is if they force prices up so equity covers them when people refinance so that they then take the risk away. If you think this is a good idea for your personal circumstance, you may as well just go drop a couple of hundred grand at the doorstep of your landlord and ask them to sh1t in your kids backpack….

    • haroldusMEMBER

      you may as well just go drop a couple of hundred grand at the doorstep of your landlord and ask them to sh1t in your kids backpack

      Now there’s a vivid image.

    • Or, “I like essential, but ultimately unproductive, assets to continue to increase in price beyond the reasonable means of people”.

      …oh…wow…that just sounds like the New Aristocracy.

    • Ah, so quite explicitly Morrison admits he is actively managing house prices … to not go down 🙂 And he believes the nation and newer generates can generate wealth by ever increasing prices – he has just disqualified himself as economically credible.

      Only house prices equal to general inflation in the long run is sustainable – the rest is encouraging bubbles at the expense of others.

      It seems in AU the effort to socialize the RE losses and privatize the RE gains has well and truly begun.

      • Yes and we would have to backtrack around 20 years before we can begin with ‘ house prices tracking wage inflation’ before even that makes economic and socially correct sense.

      • “It seems in AU the effort to socialize the RE losses and privatize the RE gains has well and truly begun.”

        That’s worth writing on an MB plaque somewhere, so we can all point to it when it really starts to happen… 🙁

  8. the fox said he had spoken to people in the sector that it was best for foxes to guard all hen houses….something to do with looking after the chickens best interests

  9. Funny that, “Labor has committed to matching”. Let me guess – Property lobby “donating” to both sides, maybe??????????

    • Perhaps. Also possible Labor realises this is a late in the game effort to pinch some votes and are matching it.

      • It’s about not losing young voters. Libs trying to wedge labor, labor neutralized it by agreeing. I doubt if it will be put to parliament if labor wins.

      • The worry I have is that this policy is ineffective on its own. So what ELSE is ScoMo planning? Rate cuts, lowered standards, but what else are they going to do?
        Whatever it is the consequences will be bad medium term.

      • If the Liberals win they will do whatever it takes. I think the wording coming from Frydenberg recently is they won’t “yet” ask the banks to relax standards but don’t want the “taps turned off”. I think if they win it will embolden them to believe that it is what the Voters want. I reckon they are probably right, too.

    • The ALP has reached what is known as the Abbott stage of their campaign. It is where a normally unelectable individual incredibly finds himself as Opposition Leader and, owing to the shambles of the government in power, in the unexpected position of becoming PM.
      As circumstances rarely align in such a fashion, the Abbott stage involves desperate pledges to match any and all promises made by one’s opponent in the dying stages of the campaign to neutralise any last minute stumbling blocks to the Lodge no matter how foolish those pledges might be.

  10. SoMPLSBoyMEMBER

    “The equity in their home will build and they’re up, up and away. That’s where we want to get them to”…”

    Even if the said ‘equity’ is negative for the borrower, it’s a positive and flaming good biz for the lenders who hold the strings that make the pollies dance this jig.
    Straya enters it’s final property delusion where all home ‘equity’ is an ‘absolute’ (positive) value: { I ‘all equity’ I }

    • Funny how it’s never “help people pay down their debt” but always “help people build ‘equity’ by throwing more and more debt towards housing”…

    • I love the policy. It’s like an offer to nail up government discounted flammable cladding over the top flammable cladding to make it less flammable.

      Have you noticed that Morrison looks a lot like The Cat in the Hat?

  11. So an income guarantee is a “terrible” idea but a home loan guarantee would be awesome?

    Just more handouts to people who already have money.

    • Heard him on AM getting skewered about this policy not having been modelled. He attempted a couple of fairly lame redirects but I thought he came across as dead in the water, taking repeated blows midships. Not even a pretence that the announced policy had been number crunched. Going on that deflated performance I think the Libs internal polling for Kooyong might be dire.

  12. Dennydavidson

    It’s a bad policy – but limited to 10K borrowers a year will it really have as much of an impact as a) Scott Morrison & housing lobby wants and b) the bears expect?

    It reeks of last minute electioneering – and I wouldn’t be surprised if the fine print mean that it’ll be relatively easy to restrict those that qualify and support less than 10K of loans a year.

  13. How does this work exactly? Does the government go as guarantor putting tax payer money as collateral?
    What happens when they go into negative equity which is a real possibility or they never get the chance to refinance?
    Or are they lending the extra 15% as a shared equity and if so what are the rates and terms of that loan?

    Also a lot of first home buyers all already doing this with their parents going as guarantor.
    Only 5% deposit is needed with a signature from mum and dad putting their house up as collateral, and your done.
    In 50% of case the parent give them the deposit as well; $90k on average.

    • You can count on the tax payer being put forward as the guarantor for any ‘special’ loans this FHB scheme will create – because it’s all in the nation’s interest you know 🙂

    • Well, lord Hazza Von Triguboff should have a few ‘new’ appartements to part ways from for the uh… right price. Fairly certain this policy gave his old todger a (high enough) rise and for the first time in the last couple of years (since prices started looking sick, funnily enough), for the first time in the last couple of years, he didn’t pee in his slippers in the morning.

    • This is what they did in the UK with ‘help to buy’ scheme introduced to help builders make a mega profit, Persimon homes CEO (a very good chum of George Osbourne, ie the UKs then Treasurer) awarded himself a £100million bonus on the back of this scheme whereby in any particular area, a new house sold for circa £ 40k more than an equivalent second hand house on the same estate, cause this is how people with low deposits could get corralled into buying anything at all. Or in some areas, very well off buyers could push prices up by maybe £150k where new houses were being sold.

  14. ChristopherJMEMBER

    ffs, for the buyers looking at the fringes, perhaps spending $500k on new build. Now, they only need 5% and good income to qual. Get $10k from parents. Get the grants – another $15k – you’re there. Deposit made, no pesky insurance needed. And if it all turns to custard, only lost the $10 from Mum and Dad. And that wasn’t going to be repaid anyways…

    The fact that labor matched is telling

  15. Why buy now as a FHB?

    First the super gig
    Now this
    State govenments are ramping up stamp duty exemptions and first home buyer grants

    What will there be in 12 months time? And 12 months after that? MOAR

  16. There’s no modelling behind this. Just a last minute brain fart by the PM to take at least a semblance of policy to the election.

    As for Labor matching it – pure politics. They know it was a brain fart, and they have the momentum so why not just steal Scummo’s lunch? When they’re in government (as predicted), I reckon they’ll just toss it in the bin.

    • …steal Scummo’s lunch…

      In the old country the equivalent of that is drink his beer and piss in his bottles….which is reserved for particularly despised politicians.

  17. SupernovaMEMBER

    Future subprime-FHB have suddenly become another pink-batt saga in an attempt to save the correcting Aussie housing market. Desperate times call for desperate stuff. I wonder what an ALP Govt. would do with this policy if it’s only success through the Senate was with Fraser Anning’s Conservative National Party?