Allowing super for home deposits would ignite new housing price explosion [LINK CORRECTED]

The McKell Institute

***A previous version of this release was sent a little earlier with a broken link***

Scott Morrison’s plan to allow people to spend their superannuation savings on a home deposit would reignite a housing price explosion, increase household debt and deplete retirement savings, according to the latest detailed modelling conducted by the nation’s leading property economists.

A McKell Institute report, done in collaboration with researchers from the Centre for Housing, Urban and Regional Planning at the University of South Australia, Mortgaging Our Future, released just five months ago, used sophisticated modelling to project the effect on the housing market should Australians be given access to their super to use on a home deposit – a policy announced by Scott Morrison at the Coalition campaign launch today.

Modelling for the report found that allowing prospective buyers to access $40,000 of superannuation would push up house prices and increase housing-related debt. The Government proposal would allow access to up to $50,000 from superannuation.

City

New debt ($b)

Median House Price Increase ($) – March 2022

Sydney

23.3

45,342

Melbourne

25.4

31,126

Brisbane

6.9

99,346

Adelaide

4.8

84,534

Perth

11.2

57,413

Hobart

1.3

92,796

TOTAL

73.6

The median house price in Sydney would increase by more than $40,000, while in Brisbane it would increase by almost $100,000.

Further, an additional $25 billion of debt would be incurred by Melbourne households while debt in Sydney would increase by $23 billion.

The report also found that Australians who chose to invest in a house deposit instead of keeping their money invested in super would retire worse off, because the average returns in a super fund are superior to the average growth in house prices over the long term.

The McKell Institute’s executive director, Michael Buckland, said the data showed the policy amounted to a further intergenerational transfer of wealth from young people to existing, older homeowners.

“Homes are already unaffordable for millions of Australians and Scott Morrison’s proposal would pour fuel on the fire,” Mr Buckland said.

“What first home buyers desperately need is a little calm in the overheated housing market. This proposal would kick start yet another house price spiral, stripping young people of their super savings and doing virtually nothing to improve real affordability.

“Super-for-housing would basically mean first-home buyers handing their hard-earned retirement savings to existing property owners, when they would be much better off investing that money in super.

“Young Australians need their retirement savings quarantined and compounding. Using these savings to fuel yet another house price frenzy would be policy madness.”

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