The Government’s decision to allow Australians to access $20,000 of their superannuation early could have devastating consequences for the Australian housing market and potential buyers, the peak superannuation body has warned.
Australians in financial hardship were eligible to withdraw two sets of $10,000 from their superannuation early last year, at the height of the COVID-19 outbreak in Australia.
The first home super saver scheme, introduced in the 2017-18 Federal Budget, also allows borrowers to save money for a home inside their superannuation fund, where it attracts less tax.
Under this scheme, borrowers can make up to $30,000 in voluntary contributions to their superannuation before withdrawing it to funnel into their property purchase.
However, the policies could have expensive and “catastrophic” ramifications for the housing market, the Association of Superannuation Funds of Australia (ASDA) warned this week.
“Australia already has some of the most expensive housing in the world,” ASFA CEO Dr Martin Fahy said.
The national housing market increased 2.1 per cent in price over February, the highest monthly increase since 2003.
Prominent economists are also predicting double digit growth over the next year, prompting concerns the market could even overheat.
“With the prevailing macro-economic conditions and surging demand for housing, using super for housing deposits would be disastrous and push prices even further out of reach of first-time buyers,” Fahey said.
“Superannuation isn’t the reason young Australians can’t afford to buy a home of their own. A lack of supply, and the policy settings with respect to residential investment property has had a distortionary effect on demand,” he added.
ASFA’s analysis of how superannuation withdrawals affect the property market found that using super for housing deposits promotes inequality as it will most likely be used by higher income earners who could already afford property.
The second effect is that as those higher earners enter the market with more capital, they trigger higher house prices in general.
While around 80 per cent of Australians over 75 own their home outright and 80 percent of those 55-64 have a mortgage or own their home, the percentage of younger Australians in the market has fallen.
In 2013-14, 34 per cent of Australians under 35 owned a home, down from 48 per cent in 1994-95. And the decline has been even sharper among lower income households, Australian Bureau of Statistics data shows.
At the same time, the number of Australians retiring with a mortgage is increasing as loan sizes balloon. In 2018, 40 per cent of Australians aged 55-64 were still paying off their mortgage.
“Using superannuation for housing deposits is fundamentally inconsistent with the objective of superannuation to provide an adequate retirement income,” Fahy said.
“None of the comprehensive reviews of superannuation over the last decade have recommended it, while several have made recommendations to the contrary.”
ASFA blasted a lack of coordination and agreement across Federal, state and local government to tackle rising housing unaffordability and called for a national approach, rather than ad hoc measures.
Additionally, it said the Government needed to greatly increase its investment in social housing and affordable rental housing.
It comes after Federal MP Tim Wilson was slammed for appearing to suggest Australians dip into their super to buy a house in December last year.
"Aiming to buy a first home and struggling to save the deposit? For 4 more days you may be able to access your super savings now to bring a purchase forward: earlier & cheaper,” Wilson said.
“#HomeFirstSuperSecond - you’ll have a better life & a better retirement.”
Shadow Minister Chris Bowen described Wilson's claims as unlicensed financial advice, while others queried Wilson's claim.