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With the federal election less than a week away, the Australian Liberal Party has promised two new superannuation schemes in a bid to improve housing affordability.
If the Coalition government were re-elected at Saturday’s federal election, it has proposed to implement the Super Home Buyer Scheme to allow first home buyers to invest up to 40 per cent of their superannuation – up to a maximum of $50,000 to help with the purchase of their first home.
The proposal outlines that the scheme will be applicable to new and existing homes, while stipulating that upon the sale of the home, the invested amount, and any share of capital gain made from the sale based on the superannuation injected, must be returned to the user’s superannuation fund.
There are no income or property caps placed on the initiative, but eligibility is restricted to first home buyers who have a 5 per cent deposit separately saved. The Super Home Buyer Scheme would come into effect on 1 July 2023, should the Liberal party win the upcoming federal election.
Prime Minister Scott Morrison believes the scheme will support thousands of first home buyers realise their dream of home ownership.
“Super should be harnessed to support the aspiration of many thousands of families who want to buy a home,” Mr Morrison said.
“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.”
In a bid to bring more family-sized homes onto the market, Scott Morrison and federal Minister for Housing Michael Sukkar have also proposed to expand downsizer contributions to anyone over the age of 55.
At present, Australians over the age of 65 can currently make a one-off contribution of up to $300,000 into their superannuation from the sale of the family home.
While the government had already proposed to have the age cut-off lowered to 60 from July 2022, the Liberal Party has now revealed a plan to lower that age even further – to just 55, with a further extension of the time that the proceeds from the sale of a family home would be exempt from the pension asset test, of up to two years.
The announcements, which were made on Sunday, 15 May, have received mixed reviews from the real estate and financial services sectors alike.
While many bodies view the Liberal Party’s proposal as a step in the right direction to increasing accessibility and reducing housing affordability, some still believe more action needs to be taken to address these issues.
Real Estate Institute of Australia president Hayden Groves said the 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”.
He believes the initiatives will provide short-term aid and wider long-term benefits to the Australian population as home ownership leads to “healthier, happier and wealthier lives in the long term”.
These sentiments were shared by chief executive of the Real Estate Institute of Queensland (REIQ) Antonia Mercorella, who also commended the Coalition’s downsizing proposal for its potential to “free up housing stock for younger, growing Australian families”.
Similarly, the Property Council of Australia also welcomed the Coalition’s election promises, but CEO Ken Morrison noted that the pledges would not simply eradicate the house supply issues currently felt in this country. Rather, Mr Morrison said, the scheme would need to be part of a concerted effort from all government levels to address the issue of housing supply and provide ample, long-term solutions to the issue.
“The Super Home Buyer Scheme is another demand-side measure supporting the worthy goal of home ownership, but the primary challenge is to provide the housing supply and choice our growing communities need,” he said.
Instead, Mr Morrison stated that “targeted demand-side policies to support aspiring homebuyers are welcome”.
“The government’s own official forecasts predict that housing supply is set to drop by around 35 per cent right at the time population growth is resuming, with the National Housing Finance and Investment Corporation forecasting that by 2032 Australia will be 163,400 homes short of demand,” he said.
In closing, he warned that “falling supply and growing demand is a dangerous position for housing affordability”.
CoreLogic’s head of research Eliza Owen stated that the scheme is a sign the government is listening to the industry concerns, seeing the use of super as home loan security was a key recommendation in the Inquiry into Housing Affordability and Supply report released earlier in the year.
However, Ms Owen has also outlined a number of downsides related to the use of super, conceding that “allowing first homebuyers to access superannuation for their upfront housing costs on a broad basis will add to demand, and this could increase the cost of housing”.
“This may be good news for homeowners looking to protect their wealth, or sellers in an environment where housing market conditions are starting to soften, but for first homebuyers it could erode some of the benefit of dipping into their super,” she said.
“Furthermore,” Ms Owen added, “it is a very challenging time to be incentivising more housing demand in the face of supply-side constraints. Housing construction costs have risen significantly, adding to the cost and timeline of new builds”.
She also criticised the scheme for being inequitable, believing it invites higher-income first home buyers into the property market while leaving those with less super access waiting at the door.
With the median super balance for 25- to 34-year olds being $25,000, the scheme would only allow them to access $10,000 — the equivalent to some state-based first home owner grants.
“CoreLogic data shows the current median dwelling value in Australia is $748,635, the scheme could help increase the size of a standard deposit by around 1 per cent,” Ms Owen said.
It led her to argue that “Australia does not just have a housing affordability problem, but a housing equality problem.”
“Grattan research has shown over the decades that poorer Australians have seen the biggest declines in rates of home ownership, which becomes a problem when home ownership is then the difference between a comfortable retirement, and a retirement of poverty,” she stated.
“For home ownership to play such a significant role in our financial futures, it should be more equally accessible.”
‘Undermines the purpose’ of super
The Financial Services Council (FSC) has also expressed opposition to the Coalition’s scheme, stating that it “undermines the purpose of the superannuation system” and will force up to 5.3 million Australians to make a choice between home ownership or their retirement savings.
FSC CEO Blake Briggs has called the proposal a weak one, claiming that unless more is done to fix issues of housing supply, the scheme would only drive prices higher and make superannuation savings increasingly obsolete.
“Australians should not have to choose between a home and their retirement savings,” Mr Briggs said.
“The government’s own majority report into ‘Housing Affordability and Supply in Australia’ concluded that superannuation should only ever be used for housing if there were commensurate measures to increase supply.”
Mr Briggs concluded that “the government has an obligation to do more to boost supply, otherwise unleashing superannuation savings on the housing market risks driving prices higher still”.
Affordability refers to a product or service that is inexpensive and accessible for people with limited means.