The Coalition’s plan to allow first home buyers access to their superannuation would heavily favour older and wealthier people, with the median couple aged 25 to 34 likely to be able to withdraw only $18,000.
That is the conclusion of Saul Eslake, the principal of Corinna Economic Advisory, in a report commissioned by the Super Members Council which points to “six decades of evidence” that policies to boost housing demand “result in more expensive housing to the benefit of those who already own housing”, rather than boosting ownership.
Eslake’s report found that Australia “is in the midst of a growing housing crisis” with rents rising by 16.4% and new dwelling costs up 36.2% over the two years to June 2024, during which time wages grew by just 10.7%.
Since 1980 the ratio of dwelling prices to household income rose from 4.5 times to 13 times, as houses became less affordable and ownership rates declined.
After the Coalition and Greens combined to delay Senate consideration of Labor’s Help to Buy shared equity scheme until November, housing is set to be a major election issue.
Before the 2022 poll the Coalition promised first home buyers would get access to 40% of their superannuation, up to a maximum of $50,000. In opposition, it has signalled it will expand the policy.
Eslake examined data on average super balances to estimate how much could be withdrawn under the Coalition policy. He found the median non-home-owning couple both aged between 35 and 44 would be able to withdraw $38,500 for their deposit and could borrow up to $192,500 more. That would give them a total of $231,000 more to spend on a house.
The median couple aged between 45 and 65 could spend $400,000 more.
Singles between 25 and 34 have a median super balance of $20,300, while couples in that age bracket have $45,200, “which means that the median amounts which they could divert to the purchase of a home would be just over $8,100 and $18,000 respectively”. This would increase a single person’s purchasing power by $40,500 and a couple by $90,000.
“More than 78% of single people in this age range would be unable to withdraw more than $20,000,” the report said.
Eslake said it was “incontrovertible” that allowing prospective homebuyers access to their super “will result in residential property prices rising at a faster rate than they would otherwise, especially if (as seems likely) growth in the supply of housing falls short of the growth in the underlying demand for housing”.
Eslake examined 17 years of evidence from New Zealand’s similar KiwiSaver scheme, finding that home ownership rates have declined by 2.1% overall, and by 5.7% for people in their early 30s in that period.
“Advice given by New Zealand’s Treasury said the benefit of KiwiSaver would go to sellers in a supply-constrained market, and that’s exactly what has occurred,” Eslake said. “There are fewer homeowners since the scheme’s introduction.”
Super for housing “would do little for the people who are most in need of assistance in order to become homeowners and would do most for those who need it least”, he concluded.
Eslake noted the Coalition proposal “is likely to entail a significant cost to the federal budget” because earnings from super are taxed but capital gains from owner-occupied housing is not. He also predicted “greater demands on the age pension due to more people reaching retirement age with smaller superannuation savings”.
On Tuesday the Parliamentary Budget Office released advice it gave the shadow assistant housing affordability minister, Andrew Bragg, suggesting that super for housing could save $1bn in commonwealth rent assistance over four years if 20% of renters aged 35 to 59 took the policy up.
But the PBO noted people receiving rent assistance “typically have low superannuation balances” and were therefore less likely to take up the scheme. It also noted it had assumed renters would be able to get a mortgage, which could further overstate the uptake “given that the cohort analysed includes individuals close to retirement age”.
The Coalition has claimed in addition to super for housing it will pursue policies to increase supply. In March, Bragg suggested these could include incentives for states and local councils to increase density and “coerce development”.
