Home buyer inequity to grow if super used for deposit

Allowing first home buyers to access their superannuation for a home deposit would increase inequity between higher income home purchases and lower income purchasers, according to a report. 

The Association of Superannuation Funds of Australia (ASFA) said higher income purchases would be able to gain homeownership by utilising super tax benefits, while lower income purchasers would be less able or unable to take advantage of these benefits.  

ASFA also said the direct effect of the early release of super for housing deposits was that increased purchasing power would be near fully capitalised into higher house prices. This would exacerbate the upswing of the current house price-credit cycle. 

The association said other potential effects of using super for a housing deposit were: 

• Increase already high house prices and levels of household leverage, increasing the vulnerability of households and the broader economy to negative shocks; 
• Exacerbate the upswing of the current house price-credit cycle; 
• Be an effective transfer of Australians’ retirement savings to property owners 
• and developers; 
• Be ineffective in assisting those interested in achieving home ownership given that most non homeowners in target age groups have low superannuation balances; 
• Make home ownership even more difficult for those with low superannuation balances or no superannuation due to the house price impact; 
• Mostly be used by individuals who would achieve home ownership in any event; 
• Be a national policy which would be addressing a problem that is more severe in Sydney and to a lesser extent Melbourne; and 
• Expose households to significant asymmetric risk with respect to personal circumstances. For example, if a homeowner with a mortgage loses his/her job and cannot service the mortgage, the mortgage lender could repossess the dwelling for sale, leaving the individual without a home and with reduced retirement savings. 

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“The measure would also be likely to precipitate increased superannuation fund asset allocations to cash and other highly liquid assets to fund redemptions,” the report said. 

“The effect of this would be to decrease investment returns to all superannuation members, as well as diminishing aggregate returns in the system and placing pressure on the Age Pension. 

“As well, where an individual redeems their entire superannuation balance (or a significant proportion of it), for a lengthy period post-withdrawal, they will not have the benefit of superannuation as a form of insurance against genuine financial hardship.” 

The association also called for an independent review into housing affordability.