Super for housing a significant difference between the major parties as election looms

Do younger people want to tap into their super savings for a home deposit? The impending federal election will test the assumption that the Coalition policy is popular.

The price of Australia's housing increased when the RBA lowered the cash rate, and subsequently mortgage rates, in February. Picture: Nadir Kinani

As housing affordability worsens, using superannuation to fund a home deposit looms as a key issue for the May federal election, especially for younger buyers.

Super policy stands out as one of the key areas of difference between the major parties. The ALP point blank refuses to allow early access to super for home buyers, while the Coalition plans to allow super savers to tap into up to $50,000 from their fund.

With little indication yet of how popular such a move would be, the election emerges as a very public test of investor interest. Some private surveys, such as a recent limited survey of 1000 people by Compare Club, indicate a slim majority want it. But the 55 per cent of respondents in favour hardly represents a landslide.

A more revealing picture comes from the First Home Super Saver scheme, which is a notoriously complex scheme yet more than 50,000 home buyers have used it to help buy a first home. The scheme allows voluntary super contributions up to $50,000 to be used on purchasing a home.

As the first general election when young voters outnumber older voters (that is gen Z and millennials outnumber baby boomers), housing and early super access could prove a pivotal issue in May.

Many younger voters will also be asking questions about why you can’t access super for a home – but you can do so for cosmetic surgery or root canals.

In reality, “getting a leg up” in the housing market is not just about property ownership; it’s also a move that allows access to the privileged position homeowners have in the tax system whereby they can avoid capital gains tax and get special treatment in the pension system.

While many deride using super policy to solve a housing problem, the Coalition policy is more conservative than it may appear at first glance. Anyone who uses the scheme to withdraw super must re-contribute the amount back into their super fund on the sale of the property purchased.

New Zealanders have been able to access their super to buy a house since 2010 through the so-called KiwiSaver scheme. Under the terms of the scheme, potential first-home buyers can use $15,000 per year up to a limit of $50,000 to purchase a house.

But there is little evidence the NZ scheme improved the situation for first-home buyers.

Oliver Hartwich executive director of the New Zealand Initiative, an Auckland-based free market policy group, says: “Of course, a scheme like this in Australia might be popular among people trying to buy a house. Why wouldn’t it be? After all, they are looking for any help they can get.”

Hartwich says the KiwiSaver scheme “has not significantly improved housing affordability, in fact the evidence suggests it may have contributed to unintended negative consequences – homeownership rates have decreased – and the intent of supporting first-home buyers on modest incomes has been undermined as the scheme effectively targets those on middle to higher incomes”.

Industry figures such as Super Members Council chief executive Misha Schubert have criticised the Coalition scheme, saying would be a policy trap which would lift house prices and the level of debt carried by first-time buyers.

Meanwhile, home affordability continues to worsen. The latest (pre-rate cut) figures for the quarter to the end of December show the challenge of buying a first home has never been so difficult.

REIA president Leanna Pilkington says the average home loan now amounts to 50.1 per cent of the median family income which is the highest level since record keeping began in 1996.

James Kirby hosts the twice-weekly Money Puzzle podcast

Originally published as Super for housing a significant difference between the major parties as election looms