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.