'Like throwing petrol on a bonfire': Industry groups slam Coalition’s Super Home Buyer Scheme

On Sunday, Prime Minister Scott Morrison announced the Coalition’s Super Home Buyer Scheme which would enable first home buyers to use up to 40 per cent of their superannuation (maximum $50,000) towards buying a house.

"This would apply to both new and existing homes and whatever amount is invested will be returned to your super when you sell the home, including the share of the capital gain from the sale of that home,” Mr Morrison said at the Liberal party’s federal election campaign launch in Brisbane.

"Superannuation is there to help Australians in their retirement — the evidence shows that.

"The best thing we can do to help Australians achieve financial security in their retirement is to help them own their own home."

First home buyers who have separately saved 5 per cent of the required deposit would be eligible for the scheme to start on 1 July 2023. Buyers must also only buy the property for owner-occupier purposes and must live in the home for at least 12 months. 

Shortly after the announcement, the Financial Services Council (FSC) rejected the scheme, with CEO Blake Briggs explaining it would undermine the purpose of the superannuation system and “weaken” its ability to provide higher standards of living in retirement.

"The FSC recognises there is a correlation between renting in retirement and poverty amongst older Australians, but Australians should not have to choose between a home and their retirement savings,” Mr Briggs said.

“The government’s own majority report into ‘Housing Affordability and Supply in Australia’ concluded that superannuation should only ever be used for housing if there were commensurate measures to increase supply. 

“The government’s supply measure only extends downsizing to 1.3 million households, whilst potentially allowing approximately 5.3 million under 35-year-old Australians that do not yet own a home access their superannuation to buy a first home.

“The government has an obligation to do more to boost supply, otherwise unleashing superannuation savings on the housing market risks driving prices higher still.”

Similarly, Insurance Super Australia (ISA) said not only does the scheme undermine retirement savings, but that it would add tens of thousands of dollars to housing prices.

Analysis conducted by ISA suggested that a surge in housing prices could hike Australia’s five major capital city median property prices by 8 to 16 per cent.

“Throwing super into the housing market would be like throwing petrol on a bonfire – it will jack up prices, inflate young people’s mortgages and add to the aged pension, which taxpayers will have to pay for,” ISA chief executive Bernie Dean said.

“Super is meant to be for people’s retirement, not supercharging house prices and pushing the home ownership dream further away.

“Not only will it lock young people into hugely inflated mortgages without any requirement for their own deposit, it will torpedo investment returns for everyone leading to everyone having far less at retirement.”

Property economists McKell Institute has also announced their stance against the Coalition’s plan, referencing a report it released just five months ago which looked at the effects on the housing market should Australians be allowed to use their super on a home deposit.

The modelling found that giving prospective buyers access to $40,000 of superannuation would increase the median house prices across the country – almost $100,000 in Brisbane, over $90,000 in Hobart, over $84,000 in Adelaide, over $57,000 in Perth, over $40,000 in Sydney, over $30,000 in Melbourne.

The McKell Institute report’s suggested an additional $25 billion of debt would be incurred by Melbourne homes and $23 billion in Sydney.

“Homes are already unaffordable for millions of Australians and Scott Morrison’s proposal would pour fuel on the fire," McKell Institute executive director Michael 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."

Super boost for retirees 

Meanwhile, the Retirement Living Council of the Property Council of Australia has applauded a separate plan announced by the government on Sunday to “incentivise” older Australians by encouraging them to downsize their homes and put up to $300,000 from the sale into their superannuation fund.

Executive director Ben Myers called the move an important step for both older Australians looking for a home that suits them, and younger families who will see more stock on market.

Mr Myers said the Coalition’s scheme would get Australia on a path to “right-sizing”.

“We know many older Australians face barriers to right-sizing their housing and today’s announcement will provide real incentives to encourage people to unlock their home equity and move into a home that supports them to live independently for longer,” he said.

“Encouraging older Australians to right-size, not only contributes to healthier ageing, it’s also one of the smartest and fastest ways a government can boost much needed housing supply for families.”

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.