Super Home Buyer scheme could lead to increased SA house prices, experts warn

The Coalition’s superannuation scheme promises to help young South Australians into the housing market. But could it cause prices to skyrocket instead?

Experts have warned the Coalition’s Super Home Buyer scheme could drive up house prices in South Australia and spell retirement pain for a generation of young buyers.

The scheme would allow first home buyers to put up to 40 per cent of their nest egg – to a maximum of $50,000 – towards a house deposit amid a worsening housing crisis.

When the property is sold, any amount taken from the buyer’s superannuation fund would need to be returned, plus a share of any capital gains.

It has been met with furious debate, with supporters arguing it would even out the property playing field and detractors warning it could leave young people in the lurch come retirement.

So which is better: super investing or house buying?

Ray White’s chief economist Nerida Conisbee said while dipping into superannuation could help new buyers into the market, it was also likely to further drive up house prices and increase the divide between homeowners and renters.

“We know that getting a deposit together is the biggest challenge for first home buyers and anything that can help them with that deposit is a good thing … but there’s lots of challenges with (the scheme),” Ms Conisbee said.

Ms Conisbee said the UK’s similar “shared equity” scheme, which is being emulated by Labor’s home buyer proposal this election, led to a six per cent increase in property prices.

“Our (increases) are unlikely to be that extreme but it will be something that does lift prices, particularly at lower price points,” she said.

While Ms Conisbee said it was “too close to say” whether superannuation would outperform housing in terms of capital gain, experts are concerned that funds tied up in family homes could lead to losses down the track.

“The issue I have is, at retirement, when you’ve got your money wrapped up in your family home it’s harder to get that money out,” she said.

Ray White’s chief economist Nerida Conisbee says the proposal could cause pain to young buyers down the track.

“If you get to 65 and you need income, the only way to get it would be by selling the family home and downsizing … which is a pretty disruptive option and one you may not be ready for.”

“Using superannuation from early on in a person’s life cycle for a home can also lead to far less at retirement, particularly if the family home can’t be easily sold to downsize or does not increase in value as hoped.”

Ms Conisbee also said those in insecure work or with smaller superannuation contributions would struggle to use the scheme effectively – further driving a wealth divide within the housing market.

“It does put (low income earners) in a more challenging situation,” she said.

“The reality is for people who are in insecure work right now, not only are they unable to take advantage of this offer, they are also in a time where rents are increasing pretty quickly.

“If you hit retirement and you’re still renting, you’re in a vastly different situation to someone who owns their own property.”

What it means for key seats

Top SA real estate agents predict the Super Home Buyer Scheme would drive further demand for housing in the key federal seat of Boothby, which has been a hot-button area ahead of the polls on Saturday.

Liberal candidate Rachel Swift spruiked the Super Home Buyer scheme on Tuesday, saying grants for first home buyers artificially inflate the market, but transfer of superannuation would not have the same effect.

“If you look at the actual economics of it, whether you have your money in your super or your money in your home it appreciates effectively at the same value, if you discount making any improvements to your property,” she said on Tuesday morning.

Boothby candidates clash over Super Home Buyer scheme at Scotch College Q&A

“So I firmly believe that allowing people to have access to up to $50,000 from their super is helpful.”

But independent Jo Dyer said the policy was “no solution at all” and “sets up another time bomb”, while Greens candidate Jeremy Carter said the two major parties have focused on helping with a home deposit which will ultimately worsen the housing crisis.

Labor candidate Louise Miller-Frost said increasing housing supply was key to the solution, and criticised a Coalition policy that would offer pensioners, self-funded retirees and older workers financial incentives to downsize earlier.

Critics say the proposal will only drive up house prices.

“They’re selling out of one house they’re buying into another and they’re buying at the bottom of the market where they‘re in competition with first home buyers,” she said.

The sprawling electorate envelops a band of middle and working class suburbs in Adelaide‘s south, including Mitchell Park and St Marys, where urban infill is taking off.

Ouwens Casserly property expert James Robertson said a “big portion” of homes sold in these areas were going to first home buyers for their affordability.

“It‘s almost like a new sort of generation that is coming in, so you will find it would boost that part of the marketplace,” Mr Robertson said.

Klemich Real Estate director Matt Smith said first home buyers were also flocking to the northeastern corner of the knife-edge seat of Sturt, to suburbs like Highbury and Athelstone.

“It‘s a hotspot for first homebuyers, because it still has easy access to the city,” Mr Smith said.

But the electorate also covers affluent suburbs like Norwood, St Peters and Burnside, where young families would be largely locked out.

So which is better: super investing or house buying?