Super industry rejects push to access funds for home deposits

The superannuation industry argues letting first-home buyers access their retirement savings early for a home deposit will likely worsen the affordability crisis.

ASFA argues that allowing early access to super for a home deposit will continue to lock out people on lower or more modest incomes while pushing up housing prices.

Australia’s $3.5 trillion superannuation industry has rebuffed calls from the Coalition to let first-home buyers access their retirement savings early for property purchases, arguing it would probably worsen the affordability crisis and be unfair to the younger generation.

The dream of home ownership is increasingly out of reach for younger Australians grappling with soaring property prices, a cost of living crisis and high interest rates.

Liberal senator Andrew Bragg, the shadow assistant minister for home ownership who has repeatedly clashed with union-backed industry super funds, has seized on this issue to ramp up calls to allow early access to retirement savings for home deposits.

But a new study from the Association of Superannuation Funds of Australia has thrown cold water on the idea.

It found that allowing people early access to their super to buy houses would primarily help those who can already afford them without having to access their super, and would drive up housing prices overall by increasing demand.

“It would continue to lock out those people on lower or more modest incomes while pushing prices up,” ASFA chief executive Mary Delahunty told The Australian.

“Superannuation can play a role in housing affordability as an investor, to really supercharge the supply side of housing,” she said.

“(But we shouldn’t) play with the demand lever, which we know just pushes up prices, and as we see from this research, helps people who are already likely to be able to afford a house, and so it is unfair.”

Association of Superannuation Funds of Australia chief executive Mary Delahunty. Picture: Ian Currie/NCA NewsWire

Ms Delahunty said that letting people access their retirement savings might widen the gap between rich and poor instead of helping solve the affordability problem.

“The most egregious outcome of all of that would be that those people on low and modest incomes are also giving away tax concessions,” she said.

The policy would probably increase inequity in that wealthier people would be able to gain home ownership by taking advantage of superannuation tax benefits, which are larger for high-income individuals, and by outbidding those with lower super balances, ASFA’s paper says. “Lower-income purchasers would be less able or unable to take advantage of early release, with amounts released having little impact on housing affordability,” the report says.

The study found that allowing prospective homebuyers aged 25-34 to dip into their retirement savings would only improve affordability for a small proportion of high-income earners.

The vast majority would still be unable to afford a deposit. Virtually no one in that young cohort would be able to afford the median deposit for a unit or a house in Sydney, the study says. The top 20 per cent of high-income workers in the 30- to 34-year-old age bracket would be able to afford the median deposit for a unit in Melbourne, but not a house deposit.

The study focused on Australians aged 25-34 as they were seen as the likely first-home owners, Ms Delahunty said. The report does not show the results for the 35 to 44 age group or older cohorts.

The research comes as Senator Bragg last week expanded an ongoing inquiry into the retirement system to also consider ways to use super to boost home ownership, including “potential ways to establish super/mortgage accounts”.

It takes over 12 years to save for a 20 per cent deposit for a home in Sydney at the median income level, according to ANZ research, and more than nine-and-a-half years for Melbourne.

ASFA is asking the Albanese government to commission a comprehensive, independent review of housing affordability, similar to the retirement income review it published late last year.