Monday 4th August 2014Mixed Reaction to Xenophon’s First Home Buyers Plan
Independent Senator for South Australia, Nick Xenophon, wants to introduce legislative changes in the spring session of parliament to allow first home buyers to access their superannuation savings to pay a house deposit but not everyone is convinced.
Last week a Senate Economics References Committee hearing in Adelaide was told how a Canadian scheme, called Home Buyers’ Plan, has lead to improved housing affordability in that country. It allows up to $25,000 to be accessed from retirement savings for a first home but this must be paid back to the fund within 15 years.
Xenophon will be moving for changes to the Superannuation Act to allow the release of superannuation funds for a first home in Australia, with similar safeguards to the Canadian scheme.
“With more and more Australians finding it difficult to break into home ownership, adopting the Canadian scheme would make a difference to many thousands of Australians each year,” he said.
“There’s something strange about being able to access your super fund if you are about to default on your housing loan, but you can’t access it to put a deposit on a home in the first place.”
Least active sector of the home finance market
According to mortgage broker network 1300HomeLoan, allowing first home buyers to access their superannuation for a home loan deposit could have a positive impact on both the housing finance market and the superannuation sector.
1300HomeLoan managing director John Kolenda said the proposal had merit but would probably need parameters such as restricting withdrawals to a maximum of $25,000.
“Anything that can help first home buyers get into the market to buy their first home is a good thing,” he said.
“First home buyers have had a number of factors stacked against them in recent years and they are the least active sector of the home finance market despite record low interest rates.
“Many have difficulty saving for the necessary deposit and they haven’t been helped by rising real estate prices and first home owner grants restricted to new houses.”
Incentives often counterproductive
The Housing Industry Association, the voice of Australia’s residential building industry, was also cautiously supportive and said the proposal “warrants close consideration.”
“Superannuation contributions are a form of forced savings for people to support them in their retirement. Owning a home delivers the same result, but with the added benefits arising from home ownership throughout their working lives,” said Graham Wolfe, HIA’s executive director of industry policy and media.
“Many young people are busy working, renting, repaying their education costs and in many instances, raising a family. Saving for a deposit at the same time is a significant challenge.
“Accessing superannuation for a home deposit would provide temporary access to their personal savings. Provided it was repaid to their superannuation accounts over a period of time, similar to university HECS repayments, their retirement savings would be assured,” he added.
However, many felt the suggestion has little merit with Martin North, principal of Digital Finance Analytics, arguing that such incentives are too often counterproductive.
“We do not think his suggestion has merit. In fact it would be a disaster,” he said. “His proposal would be, in effect, be an additional first time [home owner] grant, by another name, and we have already shown the first time buyer incentives merely lift prices in the short term, and do nothing to assist long term.”
He added that Canada’s housing market is not the best example to follow as it is “presently overheating”.