Financial expert Ben Nash says using your retirement savings to buy real estate is a bad idea (Credit: TikTok/Getty)
The Coalition government’s plan to allow Australians to use part of their superannuation to buy a home threatens to drive up house prices across the country. Under the opposition plan, first-time home buyers would be allowed to withdraw up to $50,000 from their superannuation to get on the home buying ladder.
But new data has shed light on the potential ripple effects of the proposed policy if it is ultimately approved, and financial expert Ben Nash told Yahoo Finance he urges all Australians to tread with caution if the policy is approved.
“If we’re going to do this, and if we’re even considering this, we need to do it very carefully to make sure we really understand the impact, not just now but in the long term,” he said.
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“I think people see the supermarket as the easy option and I think a lot of people are going to be tempted to do that, but if they do, it can end up costing them a lot of money in the long run.”
Nash found that if he left that $50,000 in a super account between the ages of 30 and 65, it could grow to about $913,000, according to data calculated for Yahoo Finance.
Super plans could worsen the housing crisis
Australia’s peak body for retirement savings, the Super Members Council (SMC), has warned the idea could lead to house prices rising by up to 9 per cent and rents increasing by $3000 a year, or $57 a week.
“Rents, mortgage repayments, stamp duty and interest rates will all rise and people will stand to lose significant amounts of their pensions when they retire,” said Misha Schubert, CEO of SMC.
The Coalition government claims the initiative will enable more first-time home buyers to secure enough money for a down payment on a house.
However, the SMC predicted that the proposal would not lead to an increase in homebuyers and could financially ruin those who choose to accept the proposal in future.
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CoreLogic head of research Eliza Owen disagreed with the council’s position on potential rent increases, arguing rent increases were not directly linked to changes in house prices.
But encouraging people to dip into their superannuation savings “is not an ideal way to address falling homeownership rates”, she said.
“Even if it gives first-time homebuyers a competitive advantage in the short term, it could ultimately put upward pressure on home prices and benefit property sellers,” Owen said.
“Not to mention the loss of income from pension investments.”
Speaking at a Senate inquiry into Australia’s superannuation system earlier this year, Brendan Coates of the Grattan Institute said the Superannuation Council’s estimates of the impact of the Coalition government’s superannuation scheme on house prices “seem excessive”, but that it was likely to boost prices at the margin.
But low-income households who need the help the most are unlikely to benefit from the scheme because they are unlikely to have savings on which to draw, he told the hearing.
Mr Schubert is due to present new research into residential super to the Australian Economic Development Committee on Tuesday, where he will argue the system will reduce investment returns for everyone because it forces super funds to hold more liquid assets.
– AAP and
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