Tapping superannuation accounts for housing deposits would blow up the market, with rising house prices swallowing any benefits, new research shows.
Industry Super Australia (ISA) found that allowing couples to withdraw $40,000 between them for a home deposit would push up capital city median house prices by between 8 and 16 per cent.
In Sydney, the current median of $826,000 would balloon to $960,000, a rise of $134,000 – more than three times the allowed withdrawal.
Perth (14 per cent) Canberra (13 per cent) and Darwin (10 per cent) would all see double-figure rises while Melbourne prices would jump 9 per cent, the research found.
“In most areas the price increases and extra property taxes would quickly surpass the amount of super a first home buyer could withdraw,” ISA’s report said.
Renters and buyers hit
Already rents and home values have risen strongly, with both indices considerably higher than their levels when the COVID-19 pandemic began in earnest last April, according to CoreLogic’s research.
A rush upwards in prices will make those equations worse for both first-time buyers and tenants as landlords try to catch up with price rises by raising rents.
ISA CEO Bernie Dean said super withdrawal for housing would not only hit members accounts and ultimately leave people worse off in the housing market, it would also be a significant cost for the federal budget.
That’s because for every dollar taken out of the super system by someone in their 30s, the age pension system would have to pay up to $2.50 more to support their retirements, ultimately resulting in higher taxes.
“But the scheme is a real winner for the banks who would reap the windfall of the inflated mortgages,” Mr Dean said.
“This just confirms what experts have been saying for ages: That throwing super into the housing market would be like throwing petrol on a bonfire – it will jack up prices, inflate young people’s mortgages, and add billions to the aged pension, which taxpayers will have to pay for.
“We need sensible solutions – 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.”
It’s about inheritance
Treasurer Josh Frydenberg also raised the prospect of scrapping the legislated increase in the super guarantee from the current 9.5 per cent to 12 per cent and forcing retirees to sell their homes to pay for retirement in a speech on Friday.
Addressing aged lobby group COTA, Mr Frydenberg said the Retirement Income Review (RIR) had found that “if nothing changes, by 2060 one in every three dollars paid out of superannuation will be part of a bequest.”
“This raises the question as to whether the answer to lifting the retirement incomes of Australians is more superannuation savings or better guidance about how to maximise their superannuation savings during their retirement,” Mr Frydenberg said.
Such “maximisation”, the Treasurer said, could result in an increase in the “median person’s income in retirement by over $100,000 compared to how people typically draw down on their superannuation now.”
Even if the super guarantee were held at 9.5 per cent, “efficient use of assets” would see most people achieve “an adequate retirement” relying on a combination of super and the age pension, Mr Frydenberg said.
Rises to go?
Given the RIR found that most of the super guarantee rise would be paid for by foregone wage increases, Mr Frydenberg said holding the super guarantee at 9.5 per cent and encouraging more “efficient” use of super would result in the average retiree achieving “a better balance between their working life and retirement incomes.”
He and Prime Minister Scott Morrison would “rightly, carefully consider the implications of the legislated increase,” Mr Frydenberg said.
However, ISA said the result would be lower super balances and forced sales of family homes by retirees.
“This cruel plan to cut super would be a disaster for Australians who would retire with far less, then may be forced to sell the family home – the place that holds decades of memories – or be far more reliant on the pension,” ISA said.
Labor Senator Tony Sheldon told Parliament the Coalition had an agenda to damage the superannuation positions of ordinary Australians and that this had been demonstrated by calls from a range of Liberal members to allow super withdrawals for housing deposits.
“They are doing practically everything they can to rip the guts out of Australians’ retirement savings,” Senator Sheldon said.
The New Daily is owned by Industry Super Holdings