A recent study has raised concerns over the potential impact of allowing first-home buyers in Australia to access their superannuation funds for house deposits. The research, conducted by University of South Australia’s Professor Chris Leishman on behalf of the Super Members Council, indicates that this move could lead to a significant surge in property prices. If the Coalition’s proposal to enable first-time home purchasers to withdraw up to $50,000 from their super savings materializes, the median prices in major cities could escalate by as much as $92,500, resulting in an additional $260 fortnightly burden on mortgage payments.
The analysis suggests that house prices might surge by 7.4% to 10.3% over a two-year span if this policy is implemented. Professor Leishman emphasized the basic economic principle that injecting more demand into an inelastic market inevitably drives prices up, ultimately compromising housing affordability. The Super Members Council has projected potential median price hikes of $123,000 in Sydney, $80,000 in Melbourne, $92,000 in Brisbane, and approximately $84,000 in Perth and Adelaide.
CEO of the Super Members Council, Misha Schubert, warns that allowing early super withdrawals for housing purposes could exacerbate the housing crisis by inflating prices and limiting home ownership opportunities for Australians. Drawing parallels with New Zealand’s similar scheme, which witnessed a 134% surge in house prices and a decline in homeownership rates, the Council underscores the adverse consequences of such a policy shift. Since the introduction of the initiative in New Zealand, homeownership rates, especially among young adults, plummeted by about 7%, while the number of first-home buyers with high loan-to-value ratio mortgages tripled.
The Coalition’s proposition to permit first-home buyers to utilize 40% or up to $50,000 of their super for property purchase has sparked concerns regarding its long-term implications. Notably, many individuals under 40 do not possess sufficient superannuation funds to withdraw the full $50,000, as per the latest data from the Australian Taxation Office. For instance, the average super balance for males aged 30 to 34 stands at $56,344, while females in the same age group have around $46,289. The Super Members Council estimates that a 30-year-old withdrawing $35,000 from their super today could face a substantial reduction in retirement savings, potentially amounting to $195,000 less in today’s monetary value.
The debate surrounding the accessibility of superannuation for housing purposes underscores the delicate balance between addressing housing affordability issues and safeguarding retirement savings. As policymakers navigate this complex terrain, ensuring sustainable solutions that cater to both immediate housing needs and long-term financial security remains paramount.
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