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Tapping into retirement savings to spend on housing is not a new idea. One economist says Australia should look to New Zealand’s example before implementing such a plan.
Independent economist Saul Eslake, who is also a Vice-Chancellor’s Fellow at the University of Tasmania, has authored a report commissioned by the Super Members Council that claims the Coalition’s proposed “Super Home Buyer Scheme” has the potential to further inflate home prices.
The scheme would allow first home buyers to withdraw up to 40 per cent of their superannuation savings up to a maximum of $50,000 for a deposit on a home.
“We have 60 years of history, which unambiguously tells us, anything that allows Australians to pay more for housing than they otherwise could leads to more expensive housing and not more home owners,” he said.
Eslake pointed to the impact of a similar scheme in New Zealand to back his determination.
New Zealand’s KiwiSaver program – a voluntary, work-based retirement savings scheme used by roughly two-thirds of the population – allows for withdrawals for home deposits.
Citing over 17 years of evidence, Eslake reported that across the New Zealand market, house price spikes coincided with periods in which the volumes of withdrawals from KiwiSaver accounts rapidly increased.
Moreover, the scheme has not been effective in lifting home ownership rates, which actually declined since the home ownership withdrawal program was instituted.
“Advice given by New Zealand’s Treasury said the benefit of KiwiSaver would go to sellers in a supply constrained market, and that’s exactly what has occurred. There are fewer home owners since the scheme’s introduction,” Eslake said, citing a 2.1 per cent drop in overall home ownership rates and 5.7 per cent decrease among people in their early 30s.
Eslake said that were Australian home ownership rates to similarly decline in Australia, it would undermine “a key assumption in Australia’s retirement system – that most retirees will own their own home”.
Eslake contends that all demand-side Australian housing policies over the past several decades have served to ultimately make houses more expensive.
Given that this would be one of the biggest demand-side schemes to be implemented, he also expects that it would lead to substantial price increases.
“Depending on the number of home owners who accessed the scheme, the impact on prices could be far greater than first home owner grants.”
According to the report, analysis of average super balances showed that the median couple aged between 25–34 could likely withdraw $18,000, which, when combined with borrowing, could lead to a $90,000 higher purchase price.
A median non-home-owning couple both aged between 35 and 44 would be able to add almost $38,500 to their deposit, allowing them to spend $192,500 more.
The median couple aged between 45 and 65, if they had not previously bought a home, could spend $400,000 more.
Eslake said that ultimately, the program would be of most benefit to older and wealthier non-home owners, as younger first home buyers would be able to access less funds due to the likelihood that they have much lower super balances.
“It would do little for the people who are most in need of assistance in order to become home owners and would do most for those who need it least,” Eslake said.
ABOUT THE AUTHOR
Juliet Helmke
Based in Sydney, Juliet Helmke has a broad range of reporting and editorial experience across the areas of business, technology, entertainment and the arts. She was formerly Senior Editor at The New York Observer.
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