The reception to Scott Morrison’s plan to allow first-home buyers to use superannuation savings to fund a deposit has been a mixed bag, earning both praise and criticism.
The Coalition yesterday unveiled an eleventh-house cash splash with more policy ammunition aimed at tackling housing affordability, announcing the Super Home Buyer Scheme.
Depending on who you ask, the big-ticket plan is either “crazy” and likely to drive up prices, or something that “strikes the right balance” and will let more Aussies buy a home sooner.
What an economist says
Cameron Kusher, director of economic research at PropTrack, said the Super Home Buyer Scheme was sensible, but not without risks.
“Unlike previous proposals to allow buyers to access their super to purchase, in this one you have to pay out upon sale – or you can repay through ownership – what you have taken out plus the percentage increase in the overall price of the property,” Mr Kusher said.
“Make no mistake though, this is all predicated on prices rising. If prices were to fall, you pay back the amount you took out of above minus the percentage decrease in price. If that was large enough, you could wipe out your balance.”
The election policy would allow first-home buyers to draw a chunk of their super to fund a deposit. Picture: Getty
A recent review of retirement income found the most important factor in avoiding poverty in older age is to own a home, he said.
“So, in this context it is a sensible proposal that will help more people once they get to retirement.”
But while the policy would allow more people to access the housing market sooner, but Mr Kusher doesn’t believe it will significantly increase supply.
“Make no mistake – this is not addressing housing affordability. None of the policies announced by either side are. All of these policies just create additional housing demand.”
What housing groups say
The Real Estate Institute of Australia welcomed the policy, with president Hayden Groves saying it would help struggling first-home buyers meet the deposit hurdle.
“Not only is it the Great Australian Dream of owning your own home, we know that those that have the security of tenure of their own home lead healthier, happier and wealthier lives in the long term,” Mr Groves said.
“The Super Home Buyer Scheme strikes the right balance of addressing affordability and building retirement savings with a requirement for the super drawdown plus capital gains to be returned on the sale of the home.”
Property industry groups have overwhelmingly welcomed the plan. Picture: Getty
Master Builders Australia said the Super Home Buyer Scheme would be a “success” that aligns with the intent of superannuation in providing a sufficient retirement income.
“People who own their home, particularly in retirement, are significantly more secure financially than those who do not. They enjoy a higher standard of living,” Denita Wawn, the group’s chief executive officer, said.
“This policy will mean that many Australians who do not currently own a home will not have to choose between the benefits of home ownership and an adequate super balance in retirement.”
The Urban Development Institute of Australia said the scheme would give first-timers choice.
“This policy will mean the difference between getting into a home sooner or, for some Australians, spending more time in an uncertain rental market,” said Max Shifman, UDIA national president.
What the Prime Minister says
Mr Morrison said super should be harnessed to support the aspirations of families who want to buy 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 utilizes 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.”
Scott Morrison denies the scheme would put upward pressure on house prices. Picture: Getty
In an interview on Sunrise on Monday, the PM hit back at claims the scheme would drive up house prices.
“No, I don’t believe we’ll see that because this is a balanced policy… at both ends. It’s dealing with increasing supply by supporting downsizing, getting more supply into the market, and helping young Australians in particular, but applies to people of any age when they buy their first home to get access to their own money.”
What finance and super pundits say
The McKell Institute said the Super Home Buyer Scheme would “reignite a housing price explosion, increase household debt, and deplete retirement savings”, pointing to its modeling on such a policy.
It conducted a review of using over to buy a home in collaboration with the Center for Housing, Urban and Regional Planning at the University of South Australia five months ago.
“Modeling for the report found that allowing prospective buyers to access $40,000 of superannuation would push up house prices and increase housing-related debt,” the McKell Institute said in a statement.
“The government proposal would allow access to up to $50,000 from superannuation.
“The median house price in Sydney would increase by more than $40,000, while in Brisbane it would increase by almost $100,000. Further, an additional $25 billion of debt would be incurred by Melbourne households while debt in Sydney would increase by $23 billion.”
Critics say the scheme would increase demand and do little to encourage supply. Picture: Getty
Allowing first-time buyers to draw on super to fund a house deposit would see millions have to choose between owning a home and having adequate retirement savings, the Financial Services Council said.
“The FSC is concerned the government’s proposal weakens the sole purpose of superannuation, which is to provide higher standards of living in retirement,” FSC chief executive officer Blake Briggs said.
“The government’s own majority report, Housing Affordability and Supply in Australia, concluded that superannuation should only ever be used for housing if there were commensurate measures to increase supply.
The Association of Superannuation Funds of Australia’s deputy chief executive officer Glen McCrea said not one of the several comprehensive reviews of the superannuation model supported the idea of early release for housing.
“The early release of superannuation for housing is not a panacea, is not in line with the objectives of the system and will have long-term consequences for retirement incomes,” Mr McCrea said.
Housing affordability has become a major focus of the election campaign. Picture: Getty
And Industry Super Australia chief executive officer Bernie Dean said the Super Home Buyer Scheme 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.
“Not only will it lock young people into hugely inflated mortgages without any requirement for their own deposit, it will torpedo investment returns for everyone leading to everyone having far less at retirement.
“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.”
What Labor says
The Opposition was quick off the mark to criticize the policy, using the words of some senior Liberal figures to poke holes in the idea.
“Every heavy hitter in the Liberal Party of the last generation that has looked at this issue have knocked it on the head, whether it’s John Howard, Peter Costello, Malcolm Turnbull, or Mathias Corman,” said Jason Clare, Labour’s spokesman on housing.
“Malcolm Turnbull described this as ‘the craziest idea I’ve ever heard’. John Howard said that ‘super is for retirement’ and he’s right. Peter Costello said: ‘Well, look, this idea has been around for a long time.’ Every generation thinks it’s invented the wheel.’
“But it was Mathias Cormann who was the most searing in his criticism of this idea. He said back in 2014: ‘Access to super savings pre-retirement will not improve housing affordability.’ He said it would actually drive-up house prices by more, that is, it would reduce housing affordability, including for first-home buyers, and that the only effective way to tackle housing affordability is by boosting housing supply, not boosting demand.”