Author: Joanna Mather of AFR
Allowing first-time property buyers to divert $60,000 or more from superannuation would increase home ownership rates but would send house prices soaring, new modelling shows.
Such a scheme, which has been pushed by Liberal MPs, would add nearly $69,000 to the price of the average house in Sydney, $108,000 in Melbourne and $159,000 in Adelaide, according to a report commissioned by The McKell Institute.
McKell asked academics from the University of South Australia to model the effects that early access to a larger portion of super might have on home ownership rates and house prices. Their simulations are based on the assumption that the flow of home loan finance into housing influences housing price growth.
“Our estimates show that accessing $10,000 to $30,000 would have no discernible impact on propensity to enter home ownership early,” the report says.
“At $40,000 and above, there is a progressive increase in the number of private renters, currently saving, who enter home ownership earlier than planned but the analysis suggests that as much as $80,000 would be needed for many private renters to transition.”
But allowing prospective buyers to take $60,000 would “place significant inflationary pressure on house prices in Australia’s major cities”, the report says.
For example, prices would increase by 4.6 per cent in Sydney, 10.4 per cent in Melbourne and 28.3 per cent in the ACT.
Moreover, cash invested in home ownership is likely to compound at a lower rate than if it was invested in super, the report says.
“Real returns on super funds exceeded house price appreciation over the reference period from 2001 to 2020.
“Over time, many individuals would end up worse off financially by diverting cash from their super accounts into earlier home ownership.”
Several Liberal MPs have advocated the idea that young people should be able to withdraw some of their super to be used for a deposit on a home loan. Labor, which introduced compulsory super, strongly opposes such proposals.
McKell describes itself as a “progressive” think tank.
Credits to Author: Joanna Mather of AFR