By Peter Kelly, Retirement Strategies and Solutions Specialist, Centrepoint Alliance. Published 25th April 2017.
This old chestnut raises its head from time to time as the solution to Australia’s residential housing affordability crisis. But, is it a viable solution or, by granting early access to super to put towards purchasing a home, are we just ‘kicking the can down the street’?
It has been interesting to watch the debate being played out in the media over recent times. It is becoming more emotional as each new chapter is written.
I guess the first thing we need to come to grips with is whether the access to super should be available irrespective of the number of houses people have owned, or whether it should be restricted to first home buyers. I feel many would prefer to see it limited to first homebuyers. And, just how much should we be able to withdraw – 20%, 50%, or all of our super savings?
Should there be a requirement to match the amount of super withdrawn with non-super savings, or should there be a condition imposed that requires amounts withdrawn to be replenished into super at some time in the future?
Lots of questions to be answered!
The most recent version of the discussion appears to revolve around not so much withdrawing existing amounts in super for a home deposit, but rather, allowing a couple of years of compulsory superannuation contributions – the 9.5% superannuation guarantee contributions – to be diverted and used towards a home deposit. The scheme that I was looking at required an individual to match their superannuation contributions with personal savings on a dollar for dollar basis.
This would at least encourage people to make a concerted effort to save for their home rather than simply rely on their ability to withdraw amounts already in super.
A scheme of this nature would imply that there is a lead-time to accumulate super contributions and savings that may be used – perhaps up to three years.
But even if a scheme like this got off the ground, is it the answer to Australia’s housing affordability crisis?
We have to start with the premise that residential housing prices in Australian capital cities are expensive, particularly when looking at Sydney and Melbourne, which are approaching some of the most expensive cities in the world to buy a house. However, is allowing access to $20,000 or $30,000 of super really going to make any impact at all on the ability of average Australian first homebuyers to get their foot in the property market? Somehow, I don’t think so!
Allowing access to superannuation savings, or providing other cash incentives including first homebuyer grants, stamp duty concessions and the like, will simply mean that more money is available to chase the same number of properties. This means, when our first homebuyer goes to an auction on Saturday morning, they will have another few thousand dollars more they can bid. But then, so will the other bidders. In the end, the highest bidder will win the prize. There are no winners, perhaps apart from the vendor, and the agent selling the property whose commission is based on the price achieved!
While there remains an excess of buyers over sellers, there will be a continued pressure on prices. If bidders have some more dollars to spend, it will simply result in higher sale prices.
Somehow, I don’t think that throwing more money at the problem is going to make housing any more affordable than it currently is.
Perhaps, part of the solution is to seriously examine the supply side of the equation.
And in saying that, I am not necessarily suggesting we should be creating even more housing stock in our capital cities. An increasing focus on regional development, placing some restrictions on the sale of Australian properties to foreign investors, and changing the tax mix in relation to negative gearing and capital gains tax, might be ideas worth considering.
There is no simple ‘one size fits all’ answer to this problem. However, it will be very interesting to watch the continuing debate and see what measures are announced in the government’s 2016 Budget.
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