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Why accessing super to buy a home is never going to happen

The recent hikes in the value of property on the eastern seaboard of Australia has prompted many pundits to call for access to superannuation to address the issue of housing affordability for young people.

With the median house price in Sydney smashing through the $1 million barrier, first home buyers need every bit of help they can muster.

But there’s no shortage of opposition to the prospect of raiding the superannuation piggy bank to buy a house. After all, super is for retirement.

Under current legislation, the preservation age of superannuation is age 60 for anyone born after July 1964. 60 is a long way away for a 30 year old who needs a roof over their head so why not just give them access to their super – it’s their money anyway.

Yes, it’s their money but on November 9, the federal government introduced legislation to enshrine the objective of superannuation to have a reference point, or high water mark, for any debates on superannuation.

The objective of superannuation is “to provide income in retirement to substitute or supplement the age pension”. Further, superannuation, by definition, is a low-taxed savings structure designed to fund your retirement.

Based on this it’s going to be a tough case to argue for those wanting to allow access to super for homes. Pauline Hanson thinks it’s a great idea as quoted in parliament and on Channel 7’s Sunrise where she went head to head with Derryn Hinch.

“People need a helping hand to get into their homes, and accessing their superannuation up to a certain age into the first home, I think would help many Australians,” she said.

She put the boot in by saying, “I am polling 10%in the polls. I do not think that you’re even a blip on the radar, Derryn”.

Hinch described the proposal as “madness” and I’d have to agree.

As Keating pointed out, giving access to superannuation would inflate the housing market rally even further.

The greatest two determinants of house prices are supply and interest rates. Interest rates falling so rapidly has been the single most significant influence on the market in the past three years and singularly responsible for the price growth.

Supply is a state government issue and the amount of red tape involved in developing property or bringing new land onto the market for development has also been a contributing factor.

State Liberal governments tried to decrease red tape somewhat but we are far from hitting our straps.

In any case, if rates were to rise, the housing growth would soften or reverse anyway.

What about Western Australia or the Northern Territory? House prices have gone backwards in these areas, and price growth has been patchy across Australia anyway, so how would you fairly apply this proposal? I don’t think you could.

That said, I wouldn’t be against giving young people access to say $20,000 for a deposit or limiting the amount but it would then be their responsibility to rebuild their super for retirement.

Despite the instant gratification that people may get from accessing their super to fund a property purchase, I think it’s an impossible dream given the objective of super.

Super is becoming a political football because of the $2 trillion tied up but it’s a giant insurance policy for our retirement not a giant water hydrant to put out a fiery property problem.

Written by Sam Henderson

Sam Henderson

Sam Henderson is CEO of Henderson Maxwell, a boutique accounting and advice firm specialising in SMSF and portfolio management for retirees. He is also the host of Sky News Business’s Your Money Your Call - Retirement.

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  1. Hi Sam, your comments have a subtext mate – it’s a “super-BAD idea’ and how much money do you think a ’20-something’, millennial, Gen-Y or even even an early Gen-X have actually accumulated in super??? Probably around the $25k mark if they’re lucky and the last time I looked that’s way less than a 5% deposit on anything here in Sydney …. and what about all the associated costs (particularly that insipid lenders mortgage insurance) …. and then what happens if the individual(s) decide to sell and cash out??? What happens to the ‘super’ money then??? Yeah, it’s a SUPER-BAD IDEA …. thanks for listening Sam
    From Steve Polder

    • Thanks for your comments Steve. You’re spot on! Additional costs such as LMI is a complete waste of money for purchasers as it only covers the bank interest anyway and don’t start me on Stamp duty; that never keeps up with house price growth yet the states rarely seem to have enough money.
      Super and property are like oil and water- they just don’t mix.

  2. I have over $400,000 in Super and due to life’s ups and downs, Could not buy a home and do not have a deposit to buy a house.
    I am 47 and am worried that if I cannot access my Super to buy a house, When I retire, A lot of it will be swallowed up in buying a home where I could of been paying it off while still working with the help of Super now !!

    • You’re doing VERY well Andrew to have this amount in super considering a report by ASFS suggesting that males in your age group have average super balances of around $120k. So depending on your employment and life circumstances, maybe you need to consider an SMSF where you’ll easily be able to buy at least one property – so talk to your account and definitely have some considered conversation with Sam Henderson who can point you in the right direction there.

  3. Andrew,

    Thanks for your comments. These days you can set up a SMSF and borrow money to buy a property. If I was in your situation, its certainly a consideration if owning a property is a priority for you and your circumstances lend themselves to such a strategy.

    Typically we’d recommend a high deposit level of around 30% at least to minimise risk and maximise income. You need good income to justify maximising your super concessional contributions ($30k this FY and $25k next FY) to reduce your debt faster.

    Grab one of my books or someone else’s on the topic and for around $30, you can learn how it works. Just avoid property spruikers and dodgy sales people to ensure your structures are set up correctly before entering such an arrangement and seek advice from a professional who has ideally done it themselves or has completed many transactions to ensure they know how it works. Best of luck!

  4. Hi Sam,
    Why can’t young people set up, what I would call a Salary Sacrifice Bank Housing Loan structure, they would apply for a interest free Loan to buy Property. Both partners Salary Sacrifice up to 50 k a year into their Super Accounts, and what is left over at the end of the Month Quarterly or Yearly, pay of the Principal Loan, as their wages increase over the years, results in paying of more Debt and a Healthy Super Account.

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