With the rising cost of housing in Australia’s major cities, the Super Members Council (SMC) has revealed startling new research indicating that allowing first home buyers to dip into their superannuation for house deposits could inflate property prices by nearly $75,000. This proposal, aimed at easing the path to homeownership, seems to have the opposite effect, exacerbating the affordability crisis in the housing market.
The SMC’s study, grounded in a robust econometric model, simulated a scenario where a first home buyer could withdraw $50,000 from their super for a deposit. The findings were clear: such a scheme would fuel demand in the already heated property markets of major capital cities, leading to price surges that far exceed the initial withdrawal limit. Specifically, the median house prices in cities like Sydney, Melbourne, Brisbane, and Perth could see increases ranging from $68,900 to a staggering $86,100.
Misha Schubert, CEO of the Super Members Council, voiced concerns over the ripple effects of this policy. She highlighted that using retirement savings for housing deposits could not only spike prices across the board but also result in longer mortgage terms and higher payments for all Australians. This, in turn, could make it even more challenging for first home buyers to enter the market.
The repercussions extend beyond immediate housing affordability. Schubert pointed out the long-term impacts on individuals’ financial security in retirement. For example, a 30-year-old couple withdrawing $35,000 each from their super could face a shortfall of around $195,000 in their retirement savings. This reduction in superannuation would likely lead to increased reliance on the age pension, potentially burdening taxpayers with higher costs.
The SMC’s research aligns with international studies and expert opinions that caution against using superannuation for housing deposits. A Mercer study comparing global pension indices found no correlation between early access to retirement savings for housing and higher homeownership rates. Similarly, a review of New Zealand’s Kiwisaver scheme, which permits such withdrawals, showed lower super balances and a lower homeownership rate compared to Australia.
Prominent figures and institutions, including Retirement Income Review author Mike Callaghan, former Prime Minister Malcolm Turnbull, and the OECD’s Mathias Cormann, have all warned of the potential for such policies to inflate property prices. Despite these warnings, the debate continues on the best approach to improve housing affordability without jeopardizing the retirement security of Australians.
The Super Members Council remains committed to working with policymakers to develop stable, effective, and equitable superannuation policies. Their goal is to protect the interests of the 10 million Australians they represent while ensuring that the dream of homeownership does not come at the cost of financial security in retirement.
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