Tapping super for housing ‘a win for wealthy, older investors’

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The Coalition’s superannuation for housing scheme will increase the size of deposits and home loans for wealthy, older Australians by nearly half a million dollars if they do not already own a home, new analysis reveals.
But the borrowing capacity of younger workers would only increase by around $90,000, economist Saul Eslake found, suggesting the scheme will favour wealthier Australians rather than those struggling to break into the property market.

Allowing home buyers to access their super to fund their deposits will benefit wealthy and older investors, new analysis has found. Louie Douvis
The analysis, commissioned by industry super lobby group the Super Members Council but completed by Mr Eslake’s Corinna Economic Advisory, found younger Australians’ relatively smaller super balances would hamstring their ability to meaningfully increase their property offers relative to the rest of the market.
Under the coalition’s proposal, which it is gearing up to be a major election platform, first home buyers would be allowed to withdraw up to 40 per cent of their super to a maximum of $50,000 to help fund their investment.
But Mr Eslake warned the policy would “likely hinder” rather than help their home ownership aspirations.

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Couples aged 25-34 years old with the median super balance for their age bracket would only be able to withdraw $18,000. This would only increase their total offer value by $90,000, presuming banks adjusted their loans accordingly to reflect the higher 20 per cent deposit amount.
The median couple aged 45-65 could spend $400,000 more in comparison with their increased loan and deposit combined, while those aged 35-44 could borrow $192,500 more with a $38,500 larger deposit.
Mr Eslake conceded banks consider several criteria beyond deposit size when deciding loan amounts, but said it was still clear that the policy would increase the amount of money wealthy, older people had to spend on housing compared with lower, younger earners.
He found nearly 80 per cent of single Australians aged 25-34 would not be able to withdraw more than $20,000 under the scheme, for example.
House prices to go up
“I’ve been saying since 1980 that policies which put cash in people’s hands, allowing them to spend more on housing than they would otherwise, result in more expensive housing than more people owning housing,” he said.
“I don’t dispute that you’re better off owning a home in retirement, but if you look at how much super the typical person in the first home buyer has, super for housing isn’t going to make much difference.
“Forty per cent of what they have is peanuts … so [the policy] would do little for the people who are most in need of assistance and do most for those who need it least.”
The analysis also found that when first home owners were allowed to access their retirement savings under a similar scheme in New Zealand, the period in which withdrawal volumes from KiwiSaver accounts rose coincided with house price spikes.
“Correlation doesn’t prove causation, but … advice given by New Zealand’s Treasury said the benefit of KiwiSaver would go to sellers in a supply constrained market, and that’s exactly what has occurred.”
While the number of first home owners in their 40s, 50s, and 60s would be far less than in younger years, Mr Eslake said it still may be a reasonably large amount.
He pointed to Australians who had gone overseas for work or were divorced and so had not owned property in their own name as examples.

Source: MannerNo7000