Using super for housing could raise prices by $75k: SMC

The Super Members Council (SMC) has estimated that allowing first home buyers (FHBs) to withdraw money from their super to fund a house deposit could increase property prices by almost $75,000 in Australia’s capital cities.

The Coalition proposed a scheme in 2022 that allowed first home buyers (FHBs) to access up to $50,000 (or 40 per cent) of their super to fund their upfront house deposit. Upon the sale of the home, borrowers would need to return the amount they borrowed back to their super.

On 4 March, Michael Sukkar, shadow housing minister, reiterated that the Coalition is committed to allowing FHBs to access their super fund – and may even expand the policy – if re-elected into power.

The SMC used an econometric model to estimate what would happen to house prices should borrowers be allowed to take $50,000 from their super for a deposit – as has been proposed.

According to the research, the scheme could raise median house prices across the major capitals by 9 per cent and would “inflame an already-inflated property market”.

According to the econometric model used by the SMC, the median Perth house price would increase 13 per cent or $86,000.

The model also found that the Sydney median house price would increase by $80,000 (7 per cent), followed by Brisbane, which would increase by $78,000 (10 per cent), and Melbourne by $70,000 (9 per cent)

The SMC’s chief executive Misha Schubert said: “Using retirement savings for house deposits would just unleash a huge price hike.

“That would mean higher and longer mortgages for Australians – and would quickly make capital cities even less affordable for new home buyers struggling to get into the market.

“We all desperately want more Australians to own their own home, but this idea won’t achieve that – it would just make that goal even harder for first home buyers by making house prices even more expensive.”

The analysis also found that a 30-year-old couple who each withdrew $35,000 from their super, as the scheme would allow, would retire with $195,000 less in today’s dollars.

Changes are coming to the First Home Super Saver Scheme

The current First Home Super Saver Scheme (FHSSS) already allows borrowers to access voluntary contributions from their super of up to $50,000.

Originally brought in by the Morrison government, the scheme has been undergoing changes in recent years.

Indeed, new changes are coming in from 20 September 2024.

The changes include increasing the Commissioner of Taxation’s discretion to amend or revoke scheme requests and allowing borrowers to amend or withdraw their requests before receiving payments under the scheme.

Once the changes come into effect, individuals who revoke their request will be able to reapply for the scheme in the future.

The Australian Taxation Office (ATO) also confirmed that the commissioner can return released FHSS funds to the borrower’s super, assuming the money has not yet reached the individual.

Any FHSS funds that are returned to an individual’s super will not be counted towards super contributions caps and will be treated as non-assessable non-exempt income.

[Related: PM promises early super for housing]