Super for deposits – a gamechanger for first homebuyers

Both major parties have proposed schemes to help first homebuyers enter the housing market as part of the 2022 election campaign.

New super scheme for housing proposal

To appeal to young voters, the Coalition government has proposed that first homebuyers may be able to access up to $50,000 or 40 per cent of their superannuation balance to assist with the deposit on their first home. If the newly proposed super homebuyer scheme were to be successfully implemented it could be a potential gamechanger for the housing market.

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It’s unlikely that Labor would match such a proposal, but if implemented the super homebuyer scheme would drive a solid increase in demand for properties, beginning from the lower end of the housing market.

Repeatedly we have seen that such government incentives are effective at driving demand. During the Rudd years, the first homebuyer grants drove a strong increase in first-time buyers, which drove a ripple effect of demand through the market, flowing through to upgraders and other market participants.

Figure 1 – First homebuyer commitments by state

Figure 1 – First homebuyer commitments by state

Of course, polling suggests that the election result may render the proposal irrelevant, but the point that governments tend to be supportive of housing demand will not be lost on the market.

Protecting the downside

The suite of housing measures proposed by both sides of politics should draw a line under any expectations of a property crunch. Both major parties have been drawn towards measures supporting demand for first homebuyers and other marginal players in the market.

Figures on superannuation balances suggest that the biggest impact of the proposed scheme would likely be for couples aged 30 and above. In their younger years, most Aussies only have relatively small superannuation balances due to a lack of time in the workforce.

Both major parties have been drawn towards measures supporting demand for first homebuyers and other marginal players in the market.

The supply side of the market remains a major challenge, and a lack of coordinated approach between federal, state, and local governments has created a chronic undersupply of family-appropriate housing in many of the major employment hubs. This systematic failure is highly likely to continue in the near future. As long as that’s the situation, property prices in landlocked suburbs where demand is concentrated are likely to increase at a rate that is above inflation.

Competition between lenders

Incentives for first homebuyers will see continued elevated activity from that buying cohort over the coming years. The major lenders are likely to have special promotions to add value for first homebuyers, since they can potentially be clients for life.

The proposed super homebuyer scheme will be controversial, but at the end of the day, it’s people’s money and they should be allowed to use it as they see fit. They shouldn’t be forced to allocate funds to equities and bonds if they want to use their money as a deposit for a first property.

The proposed super homebuyer scheme will be controversial, but at the end of the day, it’s people’s money and they should be allowed to use it as they see fit.

We know that homeownership has proven to be a key cornerstone of a comfortable retirement, so allowing younger buyers to invest in a stable asset class is a positive move, even if property is less liquid than the stock market.

It’s not possible to model the market impact very accurately, not least because wealthy parents theoretically gift funds to their kids sooner, to grow their capital in a low-tax superannuation environment. Ultimately the figures would only represent a tiny proportion of super funds under management, and any argument about market distortion could equally be applied to other asset classes.

In the capital cities, the take-up would most likely be directed towards the purchase of units and apartments, due to the relatively higher cost of detached housing.

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