Should Australians be able to access super to buy a house?

The pros and cons of allowing people early access to super to buy a home.

Should Australians be able to access super to buy a house?

Assistant Treasurer Michael Sukkar has refused to rule out allowing people to access their superannuation early to help fund the purchase of their first home.

There are definite pros and cons to such an idea, and it’s not the first time it’s been raised. In 1993, when compulsory superannuation was in its infancy, it was suggested that people should be able to access their contributions to help them into the property market. The notion was nixed by the prime minister of the day, Paul Keating. In 2015, former treasurer Joe Hockey also floated the idea, as did Deputy Prime Minister Barnaby Joyce as recently as last year.

Many people have the money to pay for a deposit on a house, but it’s tied up in super.

If the Government were to allow this to go ahead, it may solve the housing affordability crisis by allowing people to use their own money, with no effect on the budget.

Sounds like a good idea?

It may also mean that, should the money that’s tied up in super instead be invested in property, it could return more profit in the long run than investing in the stock market.

But it’s just not that simple.

The fear is that allowing more people the money they need to buy a house will simply increase demand and drive up property prices, so the only people who win will be developers and real estate agents.

Think tanks around the nation fear it would reduce the efficacy of the superannuation system, making more people asset rich and cash poor, as well as more reliant on the Age Pension.

But then, as it’s really only home-owning retirees who have any chance of enjoying a comfortable, or even modest lifestyle in retirement, maybe there is an argument for this type of plan.

Imagine if, at 50, you could access your super to buy security in a home? This would not only give you a fighting chance of not renting for the rest of your life, but you would also have several years before retirement to replenish your super savings, pay down a mortgage and build up equity in your home.

The success, of course, is ensuring that any superannuation used to purchase a home is for that person to live in and not simply become yet another property investor adding to an already heated market. Also, there would have to be limits as to how much can be accessed. Ploughing all your money into property would break the cardinal rule of investment – not putting all your eggs into one basket.

Also, encouraging people to invest in property before the real reasons for our overheated property market are addressed could lead to disaster if, indeed, the bubble does burst.

But, with the right conditions, it still may be an idea worth pondering further.

What do you think of such a plan? Would you like to access your super to help you buy a home prior to retirement?

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    COMMENTS

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    Tinker
    15th Mar 2017
    10:41am
    It makes absolute sense where people struggle to find a deposit to buy a house but have enough in a Superannuation account. Renting in retirement still forces people into a pension because most of their Superannuation drawings are needed to pay the rent. Growth in property values will probably outstrip returns on Superannuation giving people the opportunity to sell, downsize and have capital to live on. Thinking that Superannuation is the only way to save for retirement only makes the fund management industry richer.
    Brissiegirl
    15th Mar 2017
    11:20am
    Why did they introduce superannuation as an intended method of getting rid of the pension if they are now considering allowing people to access it (and later access the age pension anyway)? Superannuation is the biggest rip-off of the Australian people having been dreamed up by Labor's lightweight Nick Sherry. It is a haven for (often unaffordable) costly financial planners and greedy investment companies. Simply allow everyone to cash their super in and do with it what they choose. Provide a standard, pension for everyone at age 65 regardless of assets or income (as in New Zealand) and save squillions in government department funding investigators and shuffling paperwork in their wasteful chasing people into their graves for simple or oversights most likely caused by a system so complex the ordinary person is totally confounded and lost in facts, figures, warnings and threats.
    Tinker
    15th Mar 2017
    11:32am
    I agree with Brissiegirl. Superannuation was never intended to replace the age pension but to supplement it, read all of the early publications. The present system is wasteful, driven by fund management industry. Present system with Centrelink is out of date and a universal pension like the New Zealand model is the way to go.
    People can make their own arrangements, the more they save the more they have.
    Tinker
    15th Mar 2017
    11:32am
    I agree with Brissiegirl. Superannuation was never intended to replace the age pension but to supplement it, read all of the early publications. The present system is wasteful, driven by fund management industry. Present system with Centrelink is out of date and a universal pension like the New Zealand model is the way to go.
    People can make their own arrangements, the more they save the more they have.
    Fliss
    15th Mar 2017
    12:36pm
    Agree that if every one the aged pension, it would save squillions in gvt investigations, etc. Good idea!
    HarrysOpinion
    15th Mar 2017
    1:08pm
    In addition to costly financial planners and greedy investment companies - add - the deceptive crooked Insurance companies. When the Administrators of Superannuation organisations lose part of your invested super, do they forego their Administration fee? - No ! -
    Old Geezer
    15th Mar 2017
    11:27am
    Some people are already using super so their kids can buy homes. There is a structure available where even the kids super can be used to buy their own homes. All it takes is for one to know the rules of the game and use them.
    Paulodapotter
    15th Mar 2017
    11:32am
    Use of Superannuation to buy a home, is a sure way to put first home buyers in deep debt if not deep s..t. Buying a home now will result in a disaster for first home buyers when the bubble bursts, as it inevitably will. The issue is that buying a home for the first home buyer is nigh on impossible due to the exhorbitant cost of homes in city environs. The answer is to put downward pressure on housing costs so our youth can catch up over time and there are two very good means of doing that concurrently. Increase housing availabilty and removing negative gearing on investment houses after the first investment house for all future purchases. Both initiatives should produce a soft landing over time giving our youth a chance to catch up over time, particularly when wages start to increase. This will happen eventually as it always has. However, as long as our major parties borrow the Beetles song line "You say 'yes' and I say 'no'" nothing will happen constructively.
    Old Geezer
    15th Mar 2017
    12:56pm
    Do you really think super is protected if things turn nasty? I certainly don't. At least if it is in a person's house then it is being looked after better and not sold as everyone heads for the door.
    Paulodapotter
    15th Mar 2017
    2:57pm
    There's no guarantee about anything financial. Ask those who spent huge on renovations only to have their house repossessed by government for road and tunnel expansion. However, one thing is for certain, now is not the time to convert superannuation into a deposit on over inflated housing prices. That loss is more certain than losing one's Super. If things turn that nasty, everyone that hasn't a pile of gold buried in the back garden is up s..t creek.
    floss
    15th Mar 2017
    12:12pm
    NO
    Old Geezer
    15th Mar 2017
    12:19pm
    It a better idea than what is happening with people's super now. I wouldn't have super if I couldn't have a SMSF.

    15th Mar 2017
    1:04pm
    I don't agree that super should be used for anything including buying a home. Politicians keep spouting that super belongs to the people and the people should be allowed to access it. Super is put aside for future retirement, not for future use as it is designed for supplementing retirement income and reducing the cost to governments.

    If the rules are changed to allow super to be used as a deposit on a family home then there should be strict conditions on such a transaction. It should be treated as a loan with an interest component, a caveat lodged on title to protect the debt and should be repayable either when the home is sold or 10 years, whichever occurs first. After 10 years, the home should have increased in value to allow further commercial borrowing to repay the released super.
    Fliss
    15th Mar 2017
    2:44pm
    Agree Old Man. Super is put aside for future retirement.
    HarrysOpinion
    15th Mar 2017
    1:21pm
    I think that the idea of accessing your Super for the purpose of a deposit to purchase your first residential home has some merit but, up to what age? If one hasn't been able to save a deposit by age of 35-37 what hope do these people have to afford the monthly repayments over next 25-years and what hope do they have when they lose employment? How much Super should one have before being able to access for the deposit $20,000? $30,000 and what percentage of the Super fund can they access -25%? 30%?? Should access be allowed only if the first home buyer has sufficient savings for stamp duty fee and legal fees including conveyancing plus an amount for Mortgage, Income,Home and Contents Insurance and an amount for that 'rainy day'?
    As I recollect, when I was 22-yrs old, my first home was a brand new one bedroom home unit that I rented with an option to purchase and part of my rent reduced the future purchase price. Any of those or similar schemes around?
    Old Geezer
    15th Mar 2017
    1:46pm
    It's called rent to buy and is used by Muslims as they can't pay interest.
    Fliss
    15th Mar 2017
    2:43pm
    Very valid points HS. Especially . . . . "If one hasn't been able to save a deposit by age of 35-37 what hope do these people have to afford the monthly repayments over next 25-years . . . . and what hope do they have when they lose employment?"
    Eddy
    15th Mar 2017
    11:01pm
    You are a little harsh in your judgements HS and Fliss. Many people cannot save for a decent deposit until their children are older. In our case my wife chose to stay at home to raise our children rather than put them into childcare, a decision I fully endorse. We were both in our late thirties before our youngest child went to high school and my wife reactivated her nursing qualifications to get a paying job so we could buy a house. I was past 40 when we bought. There is a lot more to this story but I won't bore you with that. My point is putting an arbitrary figure of 35-37 is unfair, different people have differing priorities. Anyway, good on you for buying at age 22, I spent my 22nd year on a 12 months, all expenses paid excursion to Vietnam while my wife looked after our baby.
    Rae
    16th Mar 2017
    8:04am
    Nice to point out we are all different Eddy and have different life experiences. Some sought and others imposed beyond our control.

    Superannuation does not work for anyone earning less than the $80 000 to $120 000 a year that defines a comfortable income.

    On the median wage you could accumulate around $200 000 after 4 decades and would still get a full pension.

    That $200 000 may not pay out the mortgage these days.

    Wages are so far behind asset price inflation to be useless now. Only high income earners can afford to buy a house.
    BillF2
    15th Mar 2017
    2:11pm
    While using money accumulated in superannuation to buy a house is a good idea, it is unlikely to make housing any more affordable. All it will do is transfer YOUR money from a wealthy super fund to a wealthy government/bank/land developer/real estate agent, and these bodies have no interest in reducing prices. The upside is that you may have a tangible asset when you retire, but if it becomes a common practice, you can bet that Centrelink will want the family home to be included in the asset test. Remember that the average punter is a sucker to be screwed whichever way he goes.
    Paulodapotter
    15th Mar 2017
    3:00pm
    PT Barnham "There's a sucker born every minute".
    Paulodapotter
    15th Mar 2017
    3:03pm
    You're absolutely right, Bill. If Super is used or if more first home buyer grants are made available it will only push prices up higher and make it even more impossible for first home buyers to buy a house. The affordability factor has to be addressed first. More houses, fewer investors.
    Sundays
    15th Mar 2017
    4:31pm
    If people can't save for a deposit you would need at some evdidence that they had been paying regular rent to at least demonstrate that they could commit to a mortgage. Then there is the whole question as to how they will fund their retirement if a signfcant amount of superannuation has been reduced. I thought the Government was trying desperately to reduce the number of people on the OAP.
    niemakawa
    15th Mar 2017
    7:41pm
    Remember that Governments control Superannuation. They set all the rules, which are continuously changing. In actual fact all the funds belong to the Government to use as it wishes. It does this by means of imposing taxes, annual limits on withdrawals, annual limits on personal contributions over and above the Government controlled SGC, Salary sacrificing. Yes Superannuation is in effect a State pension funded by the individual. Eventually this will be for many the only form of financial support in retirement, lump sums payments will not be allowed and any residual balance upon death will go to the Government.
    MICK
    16th Mar 2017
    5:54am
    What is superannuation and why was it set up? To buy a house? A new car? An overseas holiday?
    NO.....to fund a retirement income stream.
    If super is released for a house then the money which was concessionally taxed at 15% needs to then be taxed at the highest rate (49%) with the balance payable before release otherwise this will be abused and those who do this will then double dip with a government funded pension.
    Anonymous
    17th Mar 2017
    10:24am
    watching the financial advisor on the TV this morning and he said it is NOT going to happen.

    it is not a good idea at all and a young person will not have sufficient funds in there anyway to make up a decent deposit.

    also fraught with danger if the housing bubble bursts, the home is worth less, they have to sell, the bank will want the deposit and they will be left with nothing.
    fish head
    17th Mar 2017
    9:27pm
    Superannuation is supposed to support you when you retire and no longer earn a living wage. By all means blow the lot on a house and its maintenance and you eat ... what? Do ...what? go ...where? Housing is a long term purchase. It takes time and tenacity. Unless you were on a politicians wage at 50 there is NO way you could ever replace that used Super. Property is a continual financial drain no matter how well you look after it. This is not a practical suggestion.
    KB
    26th Mar 2017
    2:26pm
    I disagree with the idea.Super is supposed to be for retirement nest egg. The govermnet does not want people relying on the pension. Young people starting out do not have enough in their super. Far better to build more affordable houses.