The Coalition’s superannuation-backed first-home buyers scheme would push up property prices by as much as $134,000 while failing to expand the supply of housing, economists have warned.
The scheme, announced on Sunday, six days before Australians go to the polls, will allow first-time buyers to withdraw up to 40 per cent of their superannuation savings, up to a maximum value of $50,000, to buy a home.
The open-ended scheme would have a significant effect on the housing market and could even push up property prices by a factor of five times the amount withdrawn by buyers, according to Angela Jackson, lead economist with Impact Economics.
“I’ve seen some research from Deakin University which shows that Victorian state government first-home buyer schemes leverage the grant up by a factor of eight,” Dr Jackson said.
In that case, a $10,000 grant would result in an $80,000 increase in the amount able to be borrowed, which would ultimately push up home prices by that amount.
However, given that the Coalition’s Super Home Buyer Scheme would deliver differing amounts to home buyers depending on their super balances, the leverage would be lower than the Victorian program.
But Dr Jackson said the increases would still be significant.
“It would probably leverage up five times, so if you withdraw $10,000 [from super] the potential borrowings might be leveraged up five times to $50,000,” she said.
Research from Industry Super Australia found that the Coalition scheme would likely push up house prices by between 6 and 16 per cent depending on the demand and supply in individual capital city markets.
The highest price jump would be seen in Sydney, where prices would rise 16 per cent, or by $134,000.
The lowest would be in Hobart, where prices would jump 6 per cent, or by $26,100, ISA found.
Current owners benefit
The Coalition plan demands home buyers pay back their loan from super with a capital gains component after their first house is sold.
This means participants would be hit by the higher house prices when they buy a subsequent home, Dr Jackson said.
“House prices have gone up, which means the deposit requirements have gone up anyway [on the second house they buy],” she said.
“They’re not going to get any greater access to the housing market as a result.”
The people really benefiting from this scheme will be those who currently own houses and either sell them to those using their super or just hold onto the property and enjoy the capital gains, Dr Jackson said.
Garry Weaven, former chair of Industry Super Holdings and a senior adviser with Tanarra Capital, said the policy demonstrated an element of political desperation on the part of Prime Minister Scott Morrison.
“It’s been on the agenda periodically for the last 25 years in one form or another,” he said.
“But because it’s been tested with economists, who have said it wasn’t a good idea, they have walked away from it.
“But now they are staring defeat in the face they are saying, ‘Well, let’s give it a run’.”
Mr Weaven said the scheme would erode people’s super savings.
“The truth is that super savings are nowhere near adequate. Most people are dying with no super and they’re entering retirement with inadequate super,” he said.
Because the scheme would withdraw up to $50,000 from the super balances of its users, “it could have some of the impacts we saw on the COVID emergency early release scheme”, said Ian Fryer, research director of super consultancy Chant West.
That COVID scheme saw $37 billion withdrawn from almost three million super accounts, an average of $7645 each.
The withdrawals resulted in 460,956 people under 30 totally emptying their super accounts.
Even those taking out lesser amounts will lose tens of thousands of dollars in retirement because they will miss out on compounding interest on those amounts.
“Having said that you can only do this once,” Mr Fryer said.
And the money would need to be repaid once the house was sold. That means it will likely be less of a drain than the COVID withdrawals.
“Super is about creating the long-term financial sustainability for individuals,” Mr Fryer said.
“[It’s] about having long-term savings, and so doing something else with it in the interim is not very helpful.”
Stephen Jones, Labor’s shadow assistant treasurer, said the policy was a “dud”.
“It’s been rejected by every serious Liberal leader in the last 30 years and it will push house prices higher without building one new home,” he said.
Dr Jackson said a comprehensive housing policy was needed to work on a number of issues across the property market.
“We need to get planning right and on the tax side stamp duty is a big one and is a huge distortion,” she said.
“Moving towards a land tax to replace stamp duty would bring more land onto the market by discouraging people from land banking.”
The New Daily is owned by Industry Super Holdings