So Nick Xenophon wants to allow first home owners access to up to $25,000 of their superannuation to pay the deposit on a house.
It’s a noble idea aimed at helping younger Australians, who are increasingly being forced out of property ownership by the worsening affordability of housing, into the market.
The best thing I can find to say about it though is that this is just misguided helpfulness from the Senator from South Australia.
Misguided because like every scheme that we have seen in Australia since the start of the first home owner grants and stamp duty concession, all this will do is allow first home owners to pay the prices that sellers wanted to receive.
Certainly the various first home owner schemes have let some people get into the market sooner than would otherwise be the case, by reducing the need for savings for things like stamp duty. But is it really economically efficient to continue to pump up the tyres of an asset class which is already amongst the least affordable housing markets in the world?
Take the last big first home buyer stimulus in the wake of the GFC – house prices grew at more than 12% per-annum at one stage as buyers were able to meet, or chase, sellers’ prices. Thus arresting a fall in house prices which would otherwise have increased affordability for the very buyers that it sought to empower.
With regard to Senator Xenophon’s idea, leaving aside the policy implication which breaks the nexus between superannuation being a long-term vehicle for retirement saving in favour of current consumption (yes housing is a consumption good – if we don’t own, we rent), there is a really simple behavioural reason why the scheme is more likely than not to transfer wealth from a first home owner to the seller with no net positive gain for the economy.
That is Senator Xenophon can’t guarantee that the money taken from super won’t simply translate to a mortgage size the same as if the deposit was smaller as the first home owner uses the extra borrowing power to buy a “better” property.
The impact? Higher prices and even less affordability.
Senator Xenophon’s idea is another in a long line of policies and plans in the Australian economy aimed at perpetuating a myth that property prices will always rise and that the family home is an “investment”.
Certainly the period since 1995/96 has seen some spectacular gains in some areas of Australia and the last 12 months of property price appreciation is further disenfranchising first home owners from the markets.
But maybe an easier fix to help first home owners might be to address policies which are clearly distorting the market such as the allowance of leverage in self-managed superannuation purchases. Equally, planning and approval policies that make it expensive to get property out of the ground might be addressed locally and nationally.
Maybe we might even take another look at the protect species of Australian taxation policy – negative gearing – and its impact on affordability.
If Senator Xenophon is serious about the issue that’s how to aid first home owner affordability.
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