One of the arguments for allowing Australian first-home buyers to access their superannuation to purchase a property is that it will help to address housing affordability constraints.
They could take a proportion of their retirement savings to fund a deposit, allowing them entry to the housing market, the argument goes.
Even excluding that such a policy shift would simply add to demand, potentially resulting in even higher house prices – the case in the immediate aftermath of the global financial crisis when increased first-home owner grants brought forward prospective buyers – there’s another potential problem it’s unlikely to address.
Most younger Australians wouldn’t have much super to access, particularly in an era of low income growth and elevated youth unemployment.
And that means that any potential deposit accessed from super is likely to be small, limiting the amount a first-home buyer can borrow to fund a property purchase.
It’s something that Cameron Kusher, research analyst at CoreLogic, has been looking at, and the news is sobering for prospective buyers in cities such as Sydney and Melbourne where housing affordability concerns are the most acute.
“For arguments sake, let’s say they could have a deposit of $50,000 which means if the buyer put down a 10% deposit, they could possibly purchase a property worth up to $500,000,” he says, noting that this would still incur the additional expense of having to pay lenders’ mortgage insurance as it would be less than a 20% deposit.
“Ultimately, a purchase price of $500,000 is not going to allow the potential buyer to access very many detached homes in Sydney and Melbourne.”
Nor would it buy many units, either, especially close to the city centre.
“Only 4.1% of all the suburbs in Sydney have a current median house value of $500,000 or less and 19.7% of suburbs have a median unit value of $500,000 or less,” says Kusher.
“Gosford, Wyong and Blacktown are the dominant council areas for the locations of these houses. For units, the closest areas will be the council areas of Auburn and Parramatta council areas.”
It’s a similar story for Melbourne, although there’s slightly more housing stock available within this price range, says Kusher.
“With a budget up to $500,000 potential purchasers in Melbourne will have access to 18.7% of suburbs for houses and 50.1% of suburbs for units,” he says.
“For a house, the closest you will find to the city centre in Melbourne is within the Hume council area close to the airport.
“For a unit there are far more options and this budget would get you as close as central Melbourne with units in Melbourne, Kensington and Carlton having a median value of less than $500,000.”
So there are options, although they are not only limited in number but would also put prospective first-time buyers in direct competition with investors and foreign buyers who traditionally favour properties in this price range as well.
It would be easy to see this policy change, if introduced, merely pushing up prices further, taking affordability even further out of reach.
While Kusher admits that allowing access to superannuation to purchase a home would help buyers outside of Sydney and Melbourne, he believes that it would do little to help those seeking to buy in Australia’s largest cities.
“With both cities being the housing markets most stretched for affordability, allowing first-time buyers to access their super for a deposit is going to make little difference in affording these buyers with access to the housing market,” he says.
“Furthermore, accessing superannuation has the potential to add to housing demand which is already outstripping supply and potentially lead to even greater increases in values not only in Sydney and Melbourne but potentially elsewhere as well.”
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