When National's plan cannibalises its marginal voters
The party promising to lend you 95 per cent of a house is the same party working to make that house worth less.
On Sunday, Christopher Luxon and Chris Bishop announced that National would widen access to 5 per cent deposits by lifting the income cap on the First Home Loan scheme to $300,000. The goal: home ownership back at 74 per cent. The party boasts that first home buyers already made 29 per cent of purchases in July — a two-decade high. The housing crash did that, not the subsidy.
This is the same Chris Bishop who told reporters that average house prices were “too expensive” and needed to fall. One forecaster puts the required drop at a further 16 per cent before they count as affordable.
Hold those two thoughts together. National wants more buyers borrowing 95 per cent of an asset its own housing minister wants to shrink.
Meanwhile, Nicola Willis is cutting another 8,700 public service jobs by 2029. Wellington unemployment is up, spending is down, rents are sliding, and house values sit 27 per cent below their peak — the steepest fall in the country. In May I wrote that Willis and Bishop had engineered their own unemployment; both defend marginal positions on 7 November. Now their party is offering the survivors a 95 per cent mortgage.
Asked what her cuts would do to unemployment, Willis conceded no modelling had been done. She simply expressed confidence the redundant would find “exciting jobs in the private sector”. The private sector that depends on their salaries begs to differ.
We do not have to guess how this ends.
Australia expanded its 5 per cent deposit scheme last October — no income caps, no limit on places. One in ten homes sold the following month went to buyers using it, and prices grew at their fastest rate in two years, concentrated at the cheap end where first home buyers compete.
The Insurance Council of Australia forecast the scheme could inflate values by 10 per cent in its first year. Cotality’s Tim Lawless was blunter: it pushes prices higher and does nothing for affordability.
Go bigger. America’s Financial Crisis Inquiry Commission concluded that collapsing mortgage lending standards lit and spread the flame of the global financial crisis. Easy credit did not make houses affordable. It made them expensive, then worthless.
Subsidies chasing fixed supply always end this way. When Australia subsidised home insulation, the $2.8 billion programme was terminated within a year after hundreds of house fires and four deaths; a royal commission called it “fundamentally flawed”. New Zealand’s Warm Up New Zealand scheme had officials investigating installers who hiked prices to swallow the subsidy, while an audit found a third of insulated homes had quality problems.
Pump public money at a fixed supply and the price simply rises to meet it.
Now run the arithmetic on a 5 per cent deposit.
A buyer borrowing 95 per cent needs only a small dip to owe more than the house is worth — the exact warning Cotality gave Australia’s low-deposit buyers.
If Bishop gets the price falls he asked for, and Willis keeps shrinking the salary base that services the mortgages, National’s new homeowners inherit negative equity, mortgagee sales — and long memories. A policy built to win votes will instead manufacture the angriest voters in the country.
Why would a party do this to its own marginal voters? Follow the business model. National’s former deputy prime minister and campaign chair, Paula Bennett, is Bayleys Real Estate’s director of strategic advisory. The party runs on property money, and the surest way to convert developer donations into votes is to lend the donors’ customers their deposit. Demand-side subsidy in, transaction volume out. It is Bayleys’ business model with a caucus.
National is not backing first home buyers. It is selling them its donors’ product — and calling the finance a favour.
