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Housing affordability inquiry says open superannuation vault

First home buyers should be able to use their retirement savings as collateral for a mortgage, according to a parliamentary inquiry.

Liberal MP Jason Falinski, chair of the House of Representatives standing committee on tax and revenue has tabled the report resulting from the inquiry into housing affordability and supply in Australia.

The largest barrier to entering the property market, as Mr Falinski wrote in the chair’s foreword to the report, is building a house deposit.

“Being able to afford a home is becoming harder and harder for younger Australians. Most people focus on the price of the house, but this is short-sighted,” the MP wrote.

“The largest barrier to entry for young Australians is saving for the deposit. On all the various measures, the time it takes a worker on average wages to save for a deposit has increased from a number that could be measured in months to one that can be measured in a decade.”

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There are 16 recommendations listed by the committee, suggesting policy changes with the goal of improving housing affordability.

One of the recommendations that has aimed to ease the hurdle of the deposit, is the idea that first home buyers should be able to use their superannuation assets as security for home loans.

The committee has said the government should develop and implement policy allowing first home buyers to use their super as collateral for a home, without using the funds themselves as a deposit.

However, the policy has been recommended as contingent on the government taking steps to increase housing supply, because otherwise, raising the borrowing ability of home buyers will increase property prices.

Within the housing affordability inquiry, multiple witnesses and submitters argued against allowing early access to super to purchase a first home.

Reserve Bank of Australia (RBA) assistant governor (economic) Luci Ellis predicted that if super “were to be redirected to spending more on housing, the result would be that people would spend more on housing”.

A recent research paper from a think tank, The McKell Institute, similarly warned that allowing buyers to use their retirement savings for a house deposit could push up property prices by as much as 28.3 per cent.

“The committee acknowledges that unless first home buyers support programs are accompanied by increased housing supply entering the market, such policies usually lead to an increase in property prices,” the housing affordability inquiry report stated.

“Similarly, the committee recognises that allowing first home buyers to access or borrow against part of their super to purchase a home would, in the absence of increased housing supply, likely increase demand and lead to higher property prices.”

However, the committee’s view is that first home buyers should be able to use their super as collateral for a housing loan, given that “paying off a mortgage is a very common way of saving for retirement”.

“This would reduce the deposit needed to enter the housing market and have a similar effect to allowing access to super,” the report stated.

“However, in contrast to allowing access to super, under this approach super balances would only be reduced if the first home buyer defaulted on their home loan, which is an unexpected and infrequent occurrence in Australia.

“This approach should limit negative impacts on younger Australians and women.”

The idea of allowing super withdrawals for housing has been pushed before by Liberal backbenchers, including MP Tim Wilson and senator Andrew Bragg, as a solution for first home buyers struggling to climb the property ladder.

As argued by Mr Wilson, home ownership is the most important aspect to preparing for retirement, with it being one of the largest determinants for poverty.

He had rallied for the early super measure despite superannuation minister Jane Hume denying the government would consider implementing it.

Former prime minister Paul Keating has meanwhile said super funds could invest in build-to-rent schemes and fund public rental housing, but he has been a vocal opponent of the notion of early savings release for housing deposits.

Axe stamp duty, keep negative gearing

State and territory governments have been called on to replace stamp duty with land tax.

The federal government should conduct a review into how transactional costs resulting from the stamp duty scrap might be smoothed, the report added.

The committee has suggested the change should be implemented over time, “avoiding those who have already or recently paid stamp duty facing double taxation through the replacement land tax”.

“This change would increase housing turnover, remove an unnecessary obstacle to home ownership and stabilise government revenues,” the report said.

However, Mr Falinski’s committee has argued the Australian government should not change its current policy around negative gearing.

“The committee believes the benefits this policy provides in the form of lower rents, higher housing supply, diversity of ownership and the efficiency of the tax system, outweigh the nominal impact it has on housing prices,” the report said.

Other recommendations

Looking at regulators, no changes were called for. The paper stated that the government should continue to support APRA’s policing of banks’ lending and its power to make rules relating to non-bank lenders, if it deems the sector is materially contributing to financial system stability risks.

No changes were recommended for the RBA’s mandate, with the committee siding against calls for house price impacts to be included in its policy setting.

“The committee rejects the recent changes to the Reserve Bank of New Zealand’s mandate by the New Zealand Labour Government to consider house price sustainability when setting interest rates,” the report stated.

“The committee reaffirms that housing prices should not be an objective of monetary policy. The committee considers these changes to be retrograde to the economy with questionable benefit to home buyers.”

Other recommendations have pushed for more homes to be built. They include:

  • The federal government should institute a grant scheme that pays states and localities for delivering housing supply and affordable housing.
  • The federal government, led by the National Housing Finance and Investment Corporation (NHFIC), should implement mechanisms and work with states and territories to receive current and up-to-date forecast data on population, housing approval and completions.
  • The federal government should provide incentive payments to state and local governments to encourage better planning and property administration policies.
  • State and local governments should increase urban density in appropriate locations, using an “empowered community framework”.
  • The federal government should work with state and territory governments to reform developer contributions, ensuring that the money is used to fund value-adding and demanded infrastructure.
  • The federal government should conduct a review into the build-to-rent housing market and how it is affected by current regulations and tax policies.
  • The federal government should work with state governments through grants and subsidies to increase the supply of critical housing such as crisis housing.

[Related: Mortgage affordability sees steepest decline in 12 years]

Housing affordability inquiry says open superannuation vault
mortgagebusiness

Sarah Simpkins

Sarah Simpkins is the news editor across Mortgage Business and The Adviser.

Previously, she reported on banking, financial services and wealth management for InvestorDaily and ifa.

You can contact her on This email address is being protected from spambots. You need JavaScript enabled to view it..

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