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