Home buyers warned using super to fund deposits will cause huge price increase

Paul Eyers
By Paul Eyers
5 Min Read

Using super to buy homes will make house prices even more unaffordable, a superannuation lobby group has claimed.  

The warning comes in response to the Federal Government’s revised First Home Super Saver Scheme (FHSSS), which allows first home buyers to save and withdraw up to $50,000 in their super to help them get on the property ladder. 

However, new modelling by The Super Members Council (SMC) shows that giving everyday Aussies super access to fund a house deposit would increase property prices by up to $86,100 in some state capitals. 

They claim the policy will increase demand for property without addressing supply, ultimately driving prices a median of $75,000 higher across the state’s major capitals. 

Their modelling showed the government scheme would spike property prices as a result, quickly exceeding the maximum $50,000 withdrawable super amount in every state capital, thus rendering the policy counter-effective. 

If correct, this could contribute to a 13 per cent rise in median property prices in some cities (Perth), with a median of 9 per cent across all the states. 

The data shows prices would rocket in all major cities across Australia, with the Sydney median ballooning by $78,200, Melbourne by nearly $68,900 and Brisbane by $77,900.

Super Members Council CEO Misha Schubert said allowing withdrawals from super for house deposits would raise prices for everyone, not just first-home buyers, and further exacerbate the cost of living crisis.

“Using retirement savings for house deposits would just unleash a huge price hike,” Ms Schubert said.

“That would mean higher and longer mortgages for Australians – and would quickly make capital cities even less affordable for new home buyers struggling to get into the market.”

What is the FHSSS?

  • The FHSS scheme allows you to save money for your first home in your super. 
  • The scheme allows you to make voluntary before-tax and after-tax contributions into your super fund to save for your first home.
  • You can apply to have a maximum of $15,000 of your voluntary contributions from any one financial year withdrawn. 
  • You are limited to a total of $50,000 in contributions across all years.
  • You can only request a release under the FHSS scheme once.
  • Eligibility criteria applies. 

Ms Schubert called on the government to find other ways to help everyday Australians purchase their own home, saying the FHSSS would only make life harder for participants once they reached old age. 

The analysis showed a 30-year-old couple who withdrew a combined $70,000 from their supers to assist with a house deposit would be left with the future equivalent of nearly $200,000 less by retirement age.

“We all desperately want more Australians to own their own home, but this idea won’t achieve that – it would just make that goal even harder for first-home buyers by making house prices even more expensive,” she said. 

“Breaking the seal on super leaves people poorer in retirement and costs every Australian taxpayer more from higher age pension costs.”

However, not everyone is convinced by the damning prediction, with critics pointing out that super companies are best served by putting people off the scheme. 

Queensland homeowner and Built-it reader Matt Curd saved $19,580 in his super over three years and praised the government initiative for helping him save towards his first home deposit.

“Firstly, this only applies to voluntary contributions on top of your employer’s mandatory payments, so the idea you’re going to be left penniless at pension age is misleading,” he said.

“And secondly, it comes as no surprise that a group representing super companies would be against a scheme that allows anyone to withdraw tens of thousands of dollars at a time from their super fund.”

But it’s not just Australian super funds that have been critical of the initiative, with the Mercer CFA Institute Global Pension Index finding nations which had allowed home buyers early access to retirement savings did not demonstrate higher homeownership rates than ones which did not. 

Meanwhile, the federal government’s retirement income review in 2021, conducted by former Treasury official Mike Callaghan, did not recommend using superannuation for housing.

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Paul Eyers has worked as a journalist for a range of media publishers including News Corp and Network Ten. He has also worked outside of Australia, including time spent with ABS-CBN in the Philippines. Stepping away from the media, Paul spent five years sharpening his tools in construction - building his skill set and expertise within the trade industry. His diverse experiences and unique journey have equipped him with an insider view of Australia’s construction game to dig deep into the big stories.

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