Politicians who’ve been tasked with formulating a solution to Australia’s housing affordability crisis are open to the idea of allowing first homebuyers to use their superannuation as a deposit on a property.
Liberal MP John Alexander said soaring house prices required “courageous policies” such as allowing retirement savings be made available for home ownership.
But it’s probably just a crazy stupid concept that’ll backfire on young people…
1. It may SOUND like a good idea.
One of the reasons it’s so bad is that it actually SOUNDS so great. Like, are you telling me I can use that $30,000 in my superannuation account as a deposit on an apartment in Melbourne? SIGN ME UP NOW!!
But economists, and former treasurers Peter Costello and Paul Keating, have said it’s really, really, really not a great idea. Why? Because it won’t achieve what it sets out to do.
Prime minister Malcolm Turnbull called it a “thoroughly bad idea” back in 2015.
“This is not what the super system was designed for,” he said.
2. House prices will go up.
In the housing market there is a demand side (buyers) and supply side (sellers).
Giving young people access to superannuation increases the pool of those who want to buy, and the amount they can spend. Meaning prices have one way to go and that is UP.
Or as the Department of Treasury’s head of personal and retirement income division, Michael Tilley, said in 2015: “If you have supply constraints of sorts then obviously the more you do to increase demand, to help people to pay more for their house, that must put upward pressure on house prices”.
3. It diverts attention from everything else.
There are policies which, if implemented, could curb the rapid rise in house prices.
The government has ruled out removing generous negative gearing arrangements that allow cashed up investors to deduct investment losses from their tax bill.
Until recently it’s also said it wouldn’t increase the capital gains tax paid by investors on housing profits. This tax break is one that even the Property Council suggests could be curbed.
“[Treasurer] Scott Morrison will stop at no stupid idea to avoid taking action on negative gearing and the capital gains tax discount,” Labor’s Chris Bowen said in a statement.
The government will release a housing affordability plan in the May budget.
4. Superannuation needs time to accumulate.
Plundering retirement savings now, decades before intended, means forgoing huge payoffs in the future.
Chief economist at Industry Super Australia Stephen Anthony told BuzzFeed News one of the reasons it’s “bad policy” is that it stops young people’s money from accruing compound interest over a long period of time.
“Super is supposed to be there to help achieve a long term adequate income stream for people in retirement, and to do that you need to contribute through time and you need the magic of compound interest to kick in.”
5. It’ll transfer young people’s wealth to… well… boomers.
Who are first homebuyers? Young people.
Who are selling these expensive homes? Older people.
Welcome to an efficient mechanism for transferring younger people’s retirement savings straight into the pockets of boomers.