Should I use my super to buy a house?

Everyone wants to help you buy a house!

Everyone wants to help you buy a house!

Scott Morrison opened the final week of the election campaign trail with the controversial plan to let first home buyers use their superannuation to buy property. 

It’s not a foreign concept. When Covid was raging on, more than 3m Australians took a collective $37.8bn super out of their accounts to make ends meet.

More than 463,000 of them were under the age of 30, with people aged 26-30 withdrawing from their super at a higher rate than any other demographic.

And now, there’s another opportunity to tap into those funds with the Liberal National Coalition promising, if they are reelected, to let you take $50,000 (or 40%) of your super to access the housing market.

What would this actually look like?

Say you’re a couple buying a place that costs $800k. To be very safe, you want a 20% deposit or $160k 

Here’s how you do it:

• Save 5% or $40k ($20k each) to get in the game.
• Take $40k out of your super.
• Access another $80k under something called the New Home Guarantee system.

@theoz.com.au

Everyone wants to help you buy a home! 🏡 #auspol

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Is this a good idea?

You may have a tiny voice in the back of your head telling you this is a terrible plan. Where are your retirement savings going to come from if you pour them into a house deposit now?

Well, under the scheme, any money you take from your super must be returned to the fund once you sell the house, including any capital gains. 

Say you take out the full $50,000. 

Then you live in the house for 10 years, during which time its value doubles. 

If you then sell the house, $100,000 must be put back into your super.

Peter Tulip, chief economist for the Centre for Independent Studies, reckons your money will be just as well off in the housing market as it will be in your super account. 

“You’re about as well off either way,” he told The Oz. 

“The $50,000 accrues more interest in a superfund, but you have to remember that if you put the money into a housing deposit, you’re also saving money on rent, so it probably evens out.” 

Will this raise house prices?

In brief: Labor says yes. The Coalition says no. 

Labor’s spokesman for housing Jason Clare thinks by giving first home buyers more money, they will race to buy houses, driving up demand and prices.

Industry Super Australia (remember the “from little things big things grow” guys?) chief executive Bernie Dean said the use of super savings to buy property would drive up prices by 16 per cent in Sydney, 9 per cent in Melbourne, 8 per cent in Brisbane and 14 per cent in Perth.

But Morrison and the Coalition are adamant their other housing policies - including one which encourages Boomers to downsize their homes and free up supply - will mean changes to house prices will be "marginal". 

Well, except for Superannuation Minister Jane Hume who stepped out of line and admitted the scheme would cause a “bump” in house prices in the short term.