Allowing super deposits for homes would spark a new explosion in housing prices

Scott Morrison’s plan to allow people to spend their retirement savings on a home deposit will once again spark an explosion in home prices, increase family debt and deplete retirement savings, according to the latest detailed modeling by the nation’s top real estate economists.

The McKell Institute report, conducted in collaboration with researchers from the University of South Australia’s Center for Housing, Urban and Regional Planning, Mortgaging Our Future, and released just five months ago, used sophisticated models to highlight the impact on the housing market should Australians gain access to their super to be used for the home deposit – a policy announced by Scott Morrison at the launch of the Coalition’s campaign today.

The report’s modeling found that allowing potential buyers access to $40,000 in pension benefits would raise home prices and increase housing-related debt. The government’s proposal would allow for up to $50,000 in retirement pension.

city

New Debt (Billion Dollars)

Median Home Price Increase (in Dollars) – March 2022

Sydney

23.3

45342

Melbourne

25.4

31126

Brisbane

6.9

99346

Adelaide

4.8

84.534

Perth

11.2

57413

Hobart

1.3

92.796

Total

73.6

The median home price in Sydney will increase by more than 40 thousand dollars, while in Brisbane it will rise by about 100 thousand dollars.

Moreover, Melbourne households will incur an additional $25 billion in debt while Sydney will increase debt by $23 billion.

The report also found that Australians who chose to invest in a home deposit rather than keep their money invested in the super would retire worse, because average returns in a savings fund are above average long-term home price growth.

The McKellen Institute’s executive director, Michael Buckland, said the data shows that the policy amounts to an intergenerational transfer of wealth from younger people to older, existing homeowners.

“Homes are already unaffordable for millions of Australians, and Scott Morrison’s proposal would just fuel the fire,” Buckland said.

“What first home buyers desperately need is a little calm in the frenetic housing market. This proposal will start another vortex in home prices, strip young people of their super savings and do almost nothing to improve real affordability.

“Super Housing basically means first home buyers hand over their hard-earned retirement savings to existing property owners, when they would be better off investing that money into the Super.

Young Australians need to quarantine their retirement savings and double up. Using those savings to fuel another home’s price madness would be a policy madness.”

/General release. This material from the original organization(s) may be of a point in time nature, and is edited for clarity, style and length. The opinions and opinions expressed are those of the author(s).

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