Coalition's super for housing scheme comes under fire

Prime Minister Scott Morrison has pitched the Super Home Buyer Scheme as a last-minute election ploy, a program which would allow first home buyers to withdraw up to 40 per cent of their super, up to a maximum of $50,000, to place towards the deposit for their first property.

The scheme would apply to both new and existing homes, with the withdrawal to be returned to the buyer’s super fund when their home is sold, including a share of any capital gain.

There are no income or property caps under the proposed scheme, with the only requirements being that the borrower is a first home buyer who has separately saved 5 per cent of the deposit.

The Liberal Party believes the scheme could help buyers slash the time taken to save a deposit by three years.

If the Coalition is re-elected into power, the Super Home Buyer Scheme is expected to start from 1 July next year.

Mr Morrison has stated that super should be used to support the aspiration of owning a home.

“Our plan makes it easier for first home buyers to save for a deposit, reducing the time people need to pay rent, and also means a smaller mortgage with less debt and smaller repayments,” Mr Morrison said.

“It’s a plan that gets the balance right – it utilises money that’s currently locked away to transform a family’s life, with the money then responsibly returned to the super fund at the time of home’s sale.”

But the program has been criticised by researchers and the superannuation sector.

Super withdrawals would cover 1% of younger buyers' deposits: CoreLogic

An analysis from CoreLogic has noted that the scheme would likely add to demand and feed house price growth, but it would be unlikely to provide much help in buyers’ deposits.

It used Australian Bureau of Statistics (ABS) data to figure out that the median super balance for consumers aged between 25 and 34 is $25,000.

Under the proposed housing scheme, the 40 per cent withdrawal threshold would allow a first home buyer in that age bracket to take out $10,000 at the median level.

As the median dwelling value in Australia is now $748,653, the scheme would only help such a buyer increase their deposit by around 1 per cent.

Buyers who would be able to withdraw up to the ultimate maximum of $50,000 would have to hold at least $125,000 in their super.

CoreLogic also noted the scheme contrasts with the government’s existing Home Guarantee Scheme and Labor’s proposed shared equity program, which both have income and property price caps.

Thus, the superannuation program would be more advantageous for higher-income earners, the CoreLogic analysis concluded.

Meanwhile, Industry Super Australia has warned the program would both escalate property prices and drag borrowers’ retirement outcomes.

Modelling from the body has shown that allowing couples to withdraw up to $40,000 from their super could contribute to a rise in the median property price across the five major capital cities, varying between 8 to 16 per cent.

In Sydney for example, the body calculated there would be a resulting 16 per cent price rise to the city’s median property value, up to $960,000.

Industry Super Australia chief executive Bernie Dean commented the scheme would “lock young people into hugely inflated mortgages” and come at the detriment of their investment returns, leaving them with less at retirement.

“Throwing super into the housing market would be like throwing petrol on a bonfire – it will jack up prices, inflate young people’s mortgages and add to the aged pension, which taxpayers will have to pay for,” Mr Dean said.

“Super is meant to be for people’s retirement, not supercharging house prices and pushing the home ownership dream further away.

“We need sensible solutions to address house prices – like boosting the supply of affordable housing which will bring prices down and get young people into a home without lumbering workers with higher taxes in the future.”

Similarly, a December report from think tank McKell Institute and the University of South Australia’s Centre for Housing, cautioned that allowing prospective buyers to access $40,000 in super for housing would push up property prices by as much as 28.3 per cent.

The researchers estimated that such a move would raise new total housing debt across Australia by $73.6 billion.

It also concluded that buyers who chose to invest in a house deposit instead of retaining the money in their super would be worse off in retirement, as the average returns in a super fund have tended to be higher than average growth in house prices over the long term.

Michael Buckland, executive director at the McKell Institute, commented that the scheme would do “virtually nothing to improve affordability”.

“Young Australians need their retirement savings quarantined and compounding. Using these savings to fuel yet another house price frenzy would be policy madness,” Mr Buckland said.

But, building sector representatives at the Housing Industry Association (HIA) have applauded the Coalition’s proposal.

Research from the construction body earlier in the year had found Australians believed owning a home was more important to their retirement outcomes than their superannuation.

HIA managing director Graham Wolfe has said the scheme will allow borrowers to effectively borrow from themselves and to overcome the largest hurdle to entering the property market, saving a deposit.

“Owning your own home is the best form of security for your future retirement,” Mr Wolfe said.

“This scheme is a responsible, well thought out plan to ensure that the equity Australians hold in their super can be used effectively to ensure they own their home now and in retirement, and at the same time retain a managed approach to financial security.

“People who retire owning a home are much more likely to be financially secure in their retirement.”

[Related: Queensland confirms review into HomeBuilder applicants]