Providing young Australians with early access to their superannuation to boost their mortgage deposit could potentially result in a material uptick in house prices.

A new study by The McKell Institute shows how a super-for-housing proposal could have an inflationary effect on house prices across Australia

The study, which looked at the housing affordability situation in Australia, outlined several key points:

  • Demand-side interventions by Australian governments have not necessarily led to higher rates of homeownership.
  • Allowing buyers to access up to $30,000 in superannuation savings would have no material impact on the overall rate of homeownership.
  • Providing buyers access to at least $60,000 in superannuation savings would help more break into the market but would lead to a dramatic rise in house prices in major cities.
  • Super-for-housing would lead to increased household indebtedness.

The ACT faces the biggest inflationary impact should buyers be provided with access to $60,000 in superannuation savings, with prices set to grow by as much as 28.3%.

House prices in Hobart would also increase significantly in the same scenario, up by 22.8%.

Adelaide (20%), Perth (18.8%), Brisbane (14.8%), Darwin (12.7%), and Melbourne (10.4%) are also expected to witness price gains of more than 10%.

Meanwhile, Sydney would likely see house prices grow by 4.6%.

“Allowing individuals to make additional savings for a home loan deposit, with the tax advantages of super, may make financial sense,” the study said.

“However, allowing individuals to withdraw their mainstream super savings, intended for late retirement income, is a questionable proposed policy.”

Furthermore, the study found that those who access their super early are likely to end up being financially worse off.

Historic data from 2000 to 2020 showed that the real returns on super funds exceeded real house price appreciation.

“Assuming these historic trends are repeated in the future, this means that cash invested in home ownership will compound at a lower rate than cash invested in super,” the study said, adding that this comes with an assumption that returns are tax free in both scenarios.

This means that individuals accessing super early therefore lower the future value of their super savings.

However, it is important to note that they also avoid paying rent for the period in which they are saving, and they pay a lower purchase price than they would if they saved for five years.

The study’s simulation results show that deducting $40,000 from super is the break-even point for a several cities, including Canberra, Brisbane, Hobart, and Melbourne.

In Sydney, the breaking point is higher at $60,000, reflecting its strong house price gains.

Adelaide and Perth have a lower breaking point at $20,000.

“The analysis clearly shows that households end up worse off if they withdraw greater than these amounts from their savings in super,” the study said.

“Individuals accessing super-for-housing now would drive up housing prices further, in addition to harming their own financial future.

“Subsequent rounds of prospective home buyers would therefore face higher levels of prices still, and demands on their super would need to be higher again to compensate.”


Photo by @andretaissin on Unsplash.