Study warns super withdrawals will worsen affordability, but this NSW Senator claims it’ll help Aussies get on the housing ladder
A new study has alleged that allowing first-time home buyers to withdraw super for house deposits could result in house prices spiking by up to 10.3 per cent while increasing pension costs. But not everyone agrees with the research.
Research commissioned by the Super Members Council (SMC) has revealed that allowing first home buyers to withdraw super for house deposits could raise capital city median prices by up to $92,500, and add $260 a fortnight to a home buyer’s mortgage.
The study from the University of South Australia used two models to estimate the price impacts of a Coalition policy pledge to allow first home buyers to withdraw $50,000 from super for a home deposit.
Study author Professor Chris Leishman's modelling estimated that the Coalition’s policy would increase house prices between 7.4 per cent and 10.3 per cent over two years, which he described as an “uncontroversial finding”.
“The very close range of estimates, despite using different data and methodologies for each, means we are very confident in concluding the proposal would be inflationary,” Leishman said.
“If you add demand to an inelastic market, prices are going to rise, with the unintended consequence of making housing less affordable,” he added.
Based on Leishman’s modelling, the Super Members Council estimated that median house prices could rise by an average extra $123,000 in Sydney, $80,000 in Melbourne, in Brisbane by $92,000 and by around $84,000 in Perth and Adelaide.
The council noted that buyers would pay an additional $260 per fortnight in mortgage repayments, adding up to an additional $200,000 over the life of a housing loan.
Additionally, SMC analysed New Zealand's super for home purchase scheme, which resulted in house prices growing at twice the rate of those in Australia, and saw home ownership rates fall by 7 percentage points for New Zealanders in their 30s.
Super Members Council CEO, Misha Schubert, said the council’s research showed that using retirement savings for housing deposits would not create more new buyers, but instead result in a “supercharged” hike in house prices.
Similarly, a recent Economic Society of Australia survey showed that only one out of 49 top economists supported withdrawals of super for housing.
Schubert said that the Coalition’s policy would worsen affordability and cost-of-living pressures on young Australians, resulting in home buyers having to pay higher and longer mortgage repayments.
“Taking super out for house deposits will just further drive up house prices, fuel mortgages and debt stress in a cost-of-living crisis, and push the Great Australian Dream of home ownership even further out of reach for many young Australians,” Schubert said.
The SMS’s analysis showed that a 30-year-old who withdrew $35,000 from their super today could retire with about $195,000 less in today’s dollars.
Schubert noted that the impacts of this future reduction in super savings could result in a bill that the nation would later have to pay.
“If people retire with less super, that will also push up age pension costs – a bill that every Australian taxpayer would pay,” she concluded.
Speaking to SPI's sister publication Real Estate Business, Liberal Senator Andrew Bragg said the Coalition’s Super for Housing will instead help first buyers to enter the property market.
“This research confirms that Super for Housing will create more first home buyers. This happens at the expense of Big Super funds and Community Housing Providers,” Bragg said.
“The Australian housing market is worth $11 trillion. This report suggests an additional 150,000 first home loans. This is immaterial in the content of the housing market.”
However, Super Members Council CEO Misha Schubert offered further clarification, rather than 150,000 new home buyers, "the report shows there’d be no new homeowners - instead existing buyers would just pay more for their house."
Additionally, the NSW Senator said the Coalition plans to address the worsening housing supply and affordability issues through multiple schemes, including a $5 Billion Housing Infrastructure Fund and a 10-year freeze on NCC changes to reduce red tape and lower construction costs.
Further schemes include rebalancing migration and tackling union corruption that the party said increases building costs and delays housing projects.