Tapping into your super for a housing deposit might seem a tempting solution when buying a home seems like a distant dream for many, but it could have a negative impact on your future retirement funds.
That’s the verdict of experts who’ve crunched the numbers in response to calls to allow Australians to access their super to buy a home.
A 30-year-old couple who withdraw $35,000 each from their super today could retire with around $195,000 less, in today’s dollars, according to analysis by the peak industry body, the Super Members Council (SMC).
That’s a huge impact and would mean around $125,000 less in disposable income during their retirement.
Plus the aspirational home buyers are not likely to be any better off as house prices are expected to continue upwards. If the proposals to allow access to super for home deposits are introduced, median property prices in our five biggest cities are expected to increase by $75,000.
“First home buyers would lose most, if not all, of their super withdrawal through price hikes due to a surge in demand,” the SMC analysis said.
“This policy would add fuel on top of an already overheated housing market, locking even more first-home buyers out of home ownership.”
The Finance Sector Union (FSU) is concerned about the impact this proposal may have on our members.
We all want to find ways for more Australians to be able to buy their own homes. But this isn’t the way to do it.
As the SMC highlighted, breaking the seal on super would just leave people with less savings in retirement and a bigger bill for all taxpayers.
“It’s unfair to lump the next generation with a policy that would only make the housing affordability crisis worse by driving up house prices.”
In reality, most young people trying to save for a home deposit wouldn’t have enough super to make up one.
The SMC analysis showed the median super balance of renters in their 30s is just $40,000, and $70, 000 for a couple – not enough for a deposit. It’s not until the typical renter reaches their late 40s that they have a super balance higher than the average $110,000 deposit needed for a first home.
The proposal to allow first home buyers to withdraw their super contributions for use for a home deposit was recommended in the interim report of the Senate Inquiry into Improving consumer experiences, choice, and outcomes in Australia’s retirement system, released in May 2024.
It proposed three options, with certain conditions, plus a recommendation that first home buyers be allowed to use their super balance as collateral for a first home.
But we’re calling on policymakers to reject these proposals and be more creative in seeking solutions to the housing crisis.
We know that home ownership has become an impossible dream for many people. Youngest people have been hit hardest with only 36% of those aged 25-29 able to own their own home, compared to 54% in 1970.
But raiding super is not the solution. Institutional investors, including super funds, are increasing their investment in housing and creating innovative ways to collaborate with property developers.
Of course, it’s essential that super funds continue to balance these investments with their obligations to provide members with satisfactory long-term, risk adjusted returns.
We’re calling for caution on allowing home buyers to access their super for home deposits and asking policymakers to explore other solutions.
Various organisations are analysing the need for more housing options and proposing different solutions. These include changes to regulation, funding for social and affordable housing development, unlocking access to land and streamlining the planning process.
Raiding super for deposits will only push up housing prices, create a huge bill for all taxpayers and leave workers worse off in the long term.
Young workers would also miss out on the enormous long-term benefits of compound returns which have a huge positive impact on super and end up retiring on much less if they withdraw funds for housing.
https://www.actu.org.au/wp-content/uploads/2023/12/Congress24_Housing-for-All.pdf
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