- A new survey of young Australians has shown opinion is almost perfectly divided down the middle on using super to get into the property market.
- Almost equal numbers of people said they would or wouldn’t use their retirement savings to get onto the property ladder.
- Those who said they would had two different strategies for doing so, either using super as a deposit, or putting it in an offset account to make borrowing cheaper.
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The push from the Morrison government to crack open superannuation in order to purchase property has divided parts of Australia right down the middle.
As home prices have rocketed higher over the last six months, the federal government has proposed opening up the country’s retirement savings to assist young people to get onto the property ladder.
In a push championed by Liberal backbencher Tim Wilson, there has been heated debate between both side of politics over super, its objectives, and the role of homeownership in retirement.
Exclusive data provided to Business Insider Australia shows it isn’t just Canberra torn on the issue.
A Finder survey of young Australians found 44% would use their superannuation to buy a property, while an almost identical 43% said they didn’t want to mess with their super at all. The remainder were undecided.
It’s significant that almost one in two young people would use their super, suggesting there would be huge uptake of any government program that would permit access, potentially flooding millions of dollars in retirement savings into an already hot market.
Those that were in favour — a group that was disproportionately male — had two different strategies for how they use it.
Half would dip into their fund to buy a home, using early access to get a deposit together. Many young Australians have already tried this approach illicitly under the government’s early withdrawal scheme, feigning lost work to take out up to $20,000.
“This government let house prices go through the roof with negative gearing so they can deal with the consequences of first home buyers doing whatever [they] can to get in[to] the market,” one told Business Insider Australia last year.
The other half of respondents said they would instead put their super in an offset account to use as collateral for their purchase.
Only the first strategy has really been engaged with by the government. Announced as part of Tuesday’s Federal Budget, the First Home Super Saver Scheme (FHSS) was expanded to allow first-time buyers access to up to $50,000 of their fund.
The second proposal was floated by Liberal MP John Alexander last year.
“This tool does not compromise the integrity of the superannuation account as the offset account enables the individual to pay off their mortgage quicker and therefore the property acts as a vehicle for retirement savings,” the document outlining his policy explains.
A house divided
It’s noteworthy that young Australians are split over the premise of using super to buy a home, as the dream of homeownership becomes an increasingly distant prospect.
Rock bottom interest rates mean repayments in many cases are currently lower than they have been in years, albeit with borrowers paying more over the long term as prices break new records.
The real accessibility issue with homeownership has instead shifted more to raising a deposit, at a time when price growth has outstripped wage growth by a country mile. In Sydney, house prices shot up by more than $100,000 in the first twelve weeks of this year, raising the barrier to entry higher by the day.
“Saving for a deposit is absolutely one of the biggest struggles for those looking to enter the property market, especially if you’re paying rent at the same time,” Finder home loans commentator Richard Whitten said.
But despite the hot market, Australians are clearly divided on the issue of leveraging super to buy. Economists less so. Many point out that it’s logical that such policies only increase demand for property, pushing prices up by the difference.
Such policies, they argue, do nothing to actually address affordability, such as increasing supply. At the same time, the extra cash isn’t invested in a super system that was designed to fund a sustainable retirement for workers.
“Using super for a deposit can get you on the ladder but might hurt you later at 65 – make sure you aren’t robbing Peter to pay Paul,” Whitten said.