Using super for a house deposit would make market ‘so much worse’

Property prices are set to skyrocket, increasing up to $159k in one Aussie city if a controversial plan is approved.

Allowing Aussies to pull money out of their superannuation for a house deposit would reignite a price explosion in the property market causing homes to soar in value by up to $159,000, a group of the nation’s leading property economists have warned.

A new McKell Institute report found house prices would rise anywhere between $69,000 and $159,000, depending on the capital city, if the policy was to be implemented.

Surprisingly, it wasn’t Sydney that would have the most eye-watering increase but Hobart took out the top spot with the report predicting a 22.2 per cent rise pushing up average house prices by $159,000.

Adelaide would also register a staggering rise with property values jumping by 20 per cent making them $133,000 more expensive, while Perth was projected to have close to a 19 per cent increase sending prices up by $112,000.

Even Melbourne and Brisbane’s property market was expected to soar well above Sydney under the policy with a rise of 10 and 14 per cent respectively, causing an increase of $107,000 for Melbourne and $103,000 in the Sunshine State.

Darwin would record a jump in house values of 12 per cent pushing them $81,000 higher, while Sydney would experience the smallest rise at $69,0000.

Surprisingly Sydney would have the smallest rise if the policy was introduced. Picture: NCA NewsWire / David Swift

A number of MPs in the federal government have backed a policy to allow workers to tap into their super accounts early to secure a home, with Liberal MP Tim Wilson in particular spearheading a campaign on the issue.

“Most Australians don’t think it should be a choice between home ownership and super, but the reality is every dollar locked in super can’t be used to buy a home,” Mr Wilson told the Sydney Morning Herald last year.

“If Australians buy a home they can start saving for their future retirement, whereas they can’t start saving for a home from retirement”.

But the McKell Institute’s executive director, Michael Buckland, said the report’s findings were a sobering reminder of the impact on not only the housing market but young people’s super balances.

“Homes have already become unaffordable for millions of Australians and allowing super balances to be spent on house deposits would make things so much worse,” Mr Buckland said.

“The Tim Wilson proposal would pour fuel on the fire of our housing market at exactly the time when we are desperate for a little calm.

“Super-for-housing would mean first-home buyers handing their hard-earned retirement savings

to existing property owners when they would be better off investing them in super.

“Young Australians need their retirement savings quarantined and compounding. Using these

savings to fuel yet another housing market feeding frenzy would be policy madness.”.

Liberal MP Tim Wilson is a big advocate of the policy. Picture: AAP Image/Lukas Coch

It come as the latest Australian housing price statistics have revealed a staggering 23.4 per cent surge over the past 12 months – the highest growth rate in 20 years.

The Real Estate Institute of Australia described the growth as “whopping”, with president Adrian Kelly saying it was the first time since June 2002 the annual increase had been higher than 20 per cent.

Sydney’s median house price climbed close to a whopping $1.5 million.

However, the McKell report found that Australians who chose to invest in a house deposit instead of keeping their money in super would retire worse off, because the average returns in a super fund are superior to the average growth in a home.

“Our estimates show that accessing $10,000 to $30,000 would have no discernible impact on propensity to enter home ownership early,” the report added.

“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.”

The report showed that estimates of accessing $10,000 to $30,000 would have no discernible impact on propensity to enter home ownership early. Picture: Getty Images

Industry Super Australia had already labelled the policy plan “extreme” and “fundamentally flawed” earlier this year.

It argued it would jack-up house prices and inflate mortgages for first home buyers, leading them to retire with far less and become more reliant on the aged pension, which could lead to higher taxes.

“This government needs to create a real plan for addressing the housing crisis, not one that involves crushing people’s dreams of retirement,” added ACTU assistant secretary Scott Connolly back in March.