Alarm bells ring on su­per idea

The Advertiser - Real Estate - - Front Page -

THERE’S been some talk in re­cent weeks about al­low­ing first home­buy­ers to use their su­per­an­nu­a­tion for a house de­posit. The idea came from Lat­eral Eco­nomics chief Ni­cholas Gruen at this month’s tax fo­rum gabfest in Can­berra.

Gruen sug­gested trans­fer­ring money from young peo­ple’s su­per ac­counts to a home­loan de­posit to help make real es­tate more af­ford­able for them. Pre­dictably, it was backed by the hous­ing in­dus­try but crit­i­cised by the su­per sec­tor.

As for me, alarm bells in­side my cav­ernous skull started ring­ing loudly.

Firstly, most young peo­ple don’t have enough money in su­per to fund a de­posit any­way. With a few years of em­ployer con­tri­bu­tions, they typ­i­cally have less than $10,000. It won’t go far in to­day’s mar­ket.

Se­condly, any­time we ar­ti­fi­cially stim­u­late a mar­ket we are ask­ing for trou­ble. The beefed-up first home­buyer grants of­fered un­til the end of 2009 pushed prices of first homes dra­mat­i­cally higher and caused a surge in new loans but since then we’ve had a huge drop in ac­tiv­ity be­cause all the de­mand was brought for­ward.

It’s a boom-bust sce­nario that hurts the hous­ing in­dus­try and most likely made first homes more ex­pen­sive.

Thirdly, the aim of su­per­an­nu­a­tion is not to stim­u­late the real es­tate sec­tor. It’s to fund our fu­ture where an age­ing pop­u­la­tion will be­come a big bur­den on the pub­lic pen­sion purse. Su­per is locked away un­til re­tire­ment for a rea­son – many of us can’t, won’t use it wisely when we’re young but most of us don’t want to be re­liant on a mea­gre age pen­sion when we re­tire.

Fourthly, it does noth­ing to ad­dress the hous­ing-sup­ply short­age in Aus­tralia that has been blamed for the surge in prices over the past decade. Cre­at­ing more de­mand, with­out ex­tra sup­ply, will only push house prices more out of reach.

There are bet­ter ways to help young Aus­tralians get their first homes but most re­quire long-term plan­ning and pa­tience.

Par­ents have a big role to play. En­cour­age chil­dren to start sav­ing early and start putting some of their pocket money – or board as they get older – into a sep­a­rate ac­count to be used for a de­posit when the time comes.

A $300,000 first home in Ade­laide will need a de­posit of $15,000 to $60,000, de­pend­ing on your lender.

A few thou­sand dol­lars a year saved over five to 10 years will go a long way to­wards build­ing this de­posit. Peo­ple also should in­ves­ti­gate the First Home Saver Ac­count scheme, which has some tax ben­e­fits.

The worst thing any po­ten­tial first home­owner can do is give up. Build­ing a de­posit is not easy. All pre­vi­ous gen­er­a­tions made fi­nan­cial sac­ri­fices to get their foot in the prop­erty door.

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