Super withdrawals for house deposits could lead to a $75,000 spike in property prices

New modelling from the Super Members Council (SMC) has revealed that allowing first homeowners to tap into their superannuation for a house deposit could lead to an almost $75,000 increase in property prices across Australia’s five largest capital cities. The analysis suggests that diverting retirement savings towards the housing market could exacerbate the current inflation in property prices, raising the median price in major capitals by an estimated 9%. The SMC modelled the impacts of a potential scheme that would permit first-time buyers to withdraw up to $50,000 from their super for a deposit. This proposed measure, the council found, could boost demand in the housing market significantly, ultimately pushing prices beyond the initial $50,000 accessible from superannuation. According to the model, price hikes would be widespread, with the median price in Sydney projected to climb by nearly $80,000, Melbourne by almost $70,000, Brisbane by $78,000, and Perth by an astonishing $86,000.

Misha Schubert, the CEO of the Super Members Council, expressed concerns about the broader implications of such a policy. “Allowing withdrawals from super for house deposits could raise prices for everyone – meaning all home buyers would pay higher mortgages for longer, exacerbating the cost-of-living crisis,” Schubert said. She cautioned against the false promise of improving homeownership through this approach, arguing that it would instead make it harder for first home buyers to enter the market by further inflating house prices.

The SMC has also highlighted the long-term consequences of policies encouraging people to use their retirement savings prematurely. Schubert pointed out that “breaking the seal on super leaves people poorer in retirement and costs every Australian taxpayer more from higher age pension costs.” Citing SMC analysis, she noted that a 30-year-old couple withdrawing $35,000 each from their super could end up with about $195,000 less upon retirement. This reduction in superannuation would likely lead to increased age pension costs, covered by higher taxes, affecting all Australians.

The council’s stance is supported by international studies, including a Mercer study of its Global Pension Index, which found no correlation between early access to retirement savings for housing and higher rates of homeownership. Furthermore, an academic review of New Zealand’s Kiwisaver scheme, which permits withdrawals for house deposits, identified significantly lower balances, partly due to the first home deposit withdrawal scheme, and noted that New Zealand has a lower homeownership rate than Australia.

Amidst the debate, a chorus of economists and policymakers, including Retirement Income Review author Mike Callaghan, the RBA, APRA, former Coalition PM Malcolm Turnbull, and OECD General Secretary Mathias Cormann, have warned against using superannuation for housing deposits due to the potential for inflating property prices. “The Super Members Council works with Parliamentarians and policymakers across the full breadth of the Parliament to ensure super policy is stable, effective and equitable,” Schubert concluded, underscoring the council’s commitment to producing rigorous research and analysis to inform policy development.