By Lloyd Edge
With home ownership becoming more and more difficult for first home buyers, the Government is hoping that the First Home Owner Super Saver Scheme (FHSS) will help to make home ownership possible for many first home buyers.
However, the opposite might ring true.
The FHSS was designed to allow first home buyers to save money in their super fund to purchase a home.
By making voluntary contributions (before tax) into the super fund you can then have these voluntary contributions released in order to purchase a first home up to $50,000.
However, recent modelling from ‘Super Members Council’ shows that allowing first home buyers to dip into their super balance to secure their first home will only escalate the problem with property prices expected to rise nearly $75,000 across the five largest capital cities as a result.
It is the lower, more affordable end of the market that is going to see house prices rise.
This is because most first home buyers are looking at properties within a similar price bracket and so when the demand for these properties increase alongside first home buyers being armed with an extra $50,000 to throw at a property, the economics of supply and demand pushes the price of these types of properties higher, making them more unaffordable.
The biggest worry about the FHSS is the cost of living crisis and how access to super will result in a huge price hike, meaning larger mortgages which will take longer to pay off and take more of everyone’s income.
Even more of a worry is the long term impact for when these young families need to retire.
Retirement will be further away and we would expect the retirement age to get older as people begin to not be able to afford to retire.
The long term impact could be very dire with a large chunk of retirement funds extracted from the super accounts.
Is this scheme a short term gain at the sacrifice of long term pain?
A study completed by Mercer on the Global Pension Index found that countries that allow early access to retirement savings for housing didn’t have higher rates of home ownership than Australia as you would expect.
We all hope for everyone to achieve the ‘Australian Dream’ of home ownership, but we really need to take a step back and consider- at what cost?
Allowing withdrawals from super funds may only leave people poorer in retirement which means higher age pension costs with will need to be funded by every Australian Taxpayer.
The answer is not to “add fuel to the fire” through first home owner grants, schemes, and incentives which only fires up the housing market at the lower end, increasing demand, putting upward pressure on house prices.
The only way to really bring down the cost of home ownership for first home buyers is to increase supply. The Government needs to concentrate their energies into ways we can build more homes.
This could be through providing building grants, faster approvals on builds, more land releases to create homes, changing zoning laws to allow higher density living, and incentivising young Australians to learn a trade so that we have a pipeline of builders, engineers and tradies ready to build the future Australia.
About the author: Lloyd Edge is a successful property investor, bestselling author, and award-winning buyers’ agency founder. This is an opinion column. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of this publication.
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