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Several experts have criticised the Coalition’s proposed policy to allow first home buyers to access their superannuation to purchase property, warning that it would cause a “housing price explosion”.

The policy, announced yesterday, would allow first home buyers to withdraw up to 40 per cent or $50,000 of their super early in order to allow them to enter the market sooner.

But several experts, including the McKell Institute’s executive director Michael Buckland, say unleashing thousands of new buyers on the market would only supercharge demand and cause prices to drive up again.

Prime Minister Scott Morrison has unveiled his latest housing policy which would see first home buyers allowed to withdraw 40 per cent or $50,000 of their super to buy property. (Getty)

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

“What first home buyers desperately need is a little calm in the overheated housing market. 

“This proposal would kickstart yet another house price spiral, stripping young people of their super savings and doing virtually nothing to improve real affordability.”

Five months ago the McKell Institute, along with researchers from the Centre for Housing, Urban and Regional Planning at the University of South Australia, compiled a report that looked at what affect allowing buyers to dip into their super early would have on the market.

Experts fear the policy will cause prices to boom, by about as much as first home buyers are allowed to withdraw.

The report, titled Mortgaging our Future, found in most scenarios the median house price in Sydney would increase by $40,000 while in Brisbane it would increase by almost $100,000.

Additionally, it found buyers who used super to purchase a property would be worse off in retirement because the average returns in a super fund were greater than those found in house prices over the long term.

“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,” Buckland said. 

“Young Australians need their retirement savings quarantined and compounding.

“Using these savings to fuel yet another house price frenzy would be policy madness.” 

Economists have frequently said that the supply side – the building of new homes – needs to be addressed to tackle unaffordability.

CEO of the Australian Institute of Superannuation Trustees Ava Scheerlinck says the proposed policy does little to address the supply side of housing affordability, and puts at risk the “dignity” of many Australians retirement.

“Accessing your super early won’t get you closer to your dream home or fix Australia’s housing crisis,” Scheerlinck said. 

“Using super as a deposit will drive up property prices, leaving Australians with higher debt and depleted retirement savings.

“First home buyers are being asked to choose between a home and saving for their retirement, they should be able to have both. 

“The Australian Government must address this modern-day inequity by addressing supply issues rather than raiding super.

“A first home should not come at the expense of dignity in retirement.”

A spike in building costs is another thorn in the supply side of housing, as is shipping delays due to COVID-19 in China.

Eliza Owen, head of research at property data firm CoreLogic, said that while the policy could increase the cost of housing it was important to remember that many first home buyers do not substantial super funds to draw from.

“The actual value that could be accessed through this scheme is relatively low for the typical young first homebuyer,” Owen said. 

“According to ABS data, the median superannuation balance in Australia was around $55,000 at June 2020.

“First home buyers are typically younger, and the median super balance was just $25,000 for those aged between 25 and 34 years of age. 

“At 40 per cent, the scheme would offer just $10,000 at the median level, or the equivalent of some state-based first homeowner grants.”

The greatest barrier to first home buyers is frequently cited as saving for a deposit large enough to avoid Lenders Mortgage Insurance (LMI) while simultaneously dealing with life expenses such as housing and food.

A recent report by ANZ found that on a median weekly household income of $1665, it would now take first-timers 11.4 years to save for the 20 per cent deposit required to avoid paying LMI.

Across Australia’s combined capital cities that figure falls slightly to 11.2 years, while across the nation’s combined regional centres it falls to 10.5 years.

Adelaide home smashes expectations with $2.52 million sale

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