The Coalition is staking the final week of the campaign on a plan to let people raid super to buy a house? Is that a good idea?
So housing was brought onto centre stage with the Prime Minister this week and the LNP’s campaign launch.
The bold proposal? To let people raid their super to buy their first home:
Scott Morrison has set up a contest over housing affordability with Labor and the superannuation industry just six days out from the election, by announcing homebuyers will be able to use up to $50,000 each from their super account to get into the market.
In a move that makes a major play for younger voters, the money withdrawn for a home, plus the proportionate capital gain, would have to be returned to the homebuyer’s super fund when the property was sold.
“This means that a person’s super is harnessed to purchase a first home while also protecting their long-term savings plan for retirement,” said Mr Morrison.
“This will be a game changer for thousands of Australian families. They sit and look at the money on their balance and go ‘If only I had that to help me now’.”
I actually think this isn’t a bad idea. Nothing ruins your financial future than not owning your own home. If the point of compulsory super is to secure people’s retirement, then surely homeownership is a valid use of the money.
That said, all demand-side policies tend to be self-defeating to some degree. You add money to demand, and if supply doesn’t expand at the same time, which it never seems to do in this country, then you end up pushing up prices.
How much? Well, it’s hard to know, but one independent research unit reckons a policy like this could add $100K to the price of a home in Brisbane!
Letting prospective buyers tap $40,000 of superannuation would push up housing prices, with the median price in Sydney rising by $45,000 and by almost $100,000 in Brisbane, independent modelling shows.
The effect on housing prices of a $40,000 super boost – close to the $50,000 limit under the Coalition’s super for housing proposal unveiled over the weekend – would be lowest in Melbourne, where it would push the median price up $31,126, a report published by the McKell Institute last year shows.
In Sydney, the median price would rise $45,342 and in Hobart it would gain $57,413, but the effect will be much greater in the other cities, with Brisbane’s median rising by $99,346, Hobart by $92,796 and Adelaide by $84,543, the think tank’s report says.
While the effect in cities varied, the leverage a first home buyer would gain from the cash taken out of their super – based on a 20 per cent deposit – would push their spending power up by five times in broad terms, leaving buyers with less super and more debt, McKell Institute executive director Michael Buckland said.
“The price of housing goes up by more than the amount you gain from super,” Mr Buckland said on Monday, citing the case of a Brisbane buyer.
Yeah, but there’s good debt and bad debt, and I’d argue that debt that gives you housing security in the long run can’t be all that bad.
But there you have it. Whoever wins on Saturday, property prices will probably enjoy a little bounce.
Happens every time.