Super Home Buyer Scheme tipped to fuel further house price surge

First home buyers could soon be allowed to dip into their superannuation to purchase property under a new policy floated by Prime Minister Scott Morrison on Sunday.

The Super Home Buyer Scheme would allow first-time buyers to withdraw up to 40% of their superannuation balance (capped at $50,000) and put it towards the purchase of their first home, as long as they have already saved up a 5% deposit independent of their super.

When the home is sold the original investment amount taken from super, plus the share of any capital gains made, would then be returned to the individual's superannuation, though if the price of the property falls, then so would the amount needed to be paid back.

"The Liberal and National Government are fundamentally committed to helping more Australians achieve their dream of home ownership," says Assistant Treasurer and Minister for Housing, Michael Sukkar.

"By allowing people to access their super and buy a house, we are providing the opportunity to turn that dream of home ownership a reality. Allowing your super to work for you to purchase your first home and then being returned to your super at a later date achieves the best of both worlds - home ownership and retirement security."

Unlike the existing Home Guarantee Scheme the new initiative won't have any caps on either the income of prospective buyers or the price of the property being purchased.

How has the scheme been received?

The scheme has already been met with a mixed response from both politicians and industry groups, with particular concern surrounding future superannuation balances and property prices.

In an interview with the ABC this morning Shadow Minister for Housing and Homelessness, Jason Clare, described the potential impact of the scheme on house prices as akin to throwing kerosene on a bonfire.

"Think about two young couples off to an auction. Both come armed with their superannuation which is used to supercharge the bidding war. The price goes up and up and the only winner in that auction is the person selling who gets a bigger price."

"The person that wins the auction and buys the home ends up paying a higher price, they end up having a bigger mortgage and they end up with less in their superannuation at the end of the day."

Young Australians could also be forced to make the choice between home ownership and their savings come retirement warns the CEO of the Financial Services Council, Blake Briggs.

"The FSC is concerned the Government's proposal weakens the sole purpose of superannuation, which is to provide higher standards of living in retirement. The FSC recognises there is a correlation between renting in retirement and poverty amongst older Australians, but Australians should not have to choose between a home and their retirement savings."

On the flipside, the scheme has been welcomed by some in the building and real estate industry.

"The success of this policy is that it is aligned with the intent of superannuation which is to provide sufficient retirement income," says CEO of Master Builders Australia, Denita Wawn. "People who own their home, particularly in retirement, are significantly more secure financially than those who do not. They enjoy a higher standard of living."

Will the Super Home Buyer Scheme push up house prices?

The answer seems to be yes.

Separate modelling conducted by both the McKell Institute and Industry Super Australia found that allowing prospective first home buyers to use some of their superannuation to purchase property would likely add tens of thousands of dollars to the median house prices in capital cities across the country.

In its modelling, which was based on couples being able to withdraw $40,000 from their superannuation to purchase a first property, Industry Super Australia revealed that house prices could be lifted by as much as 16% in Sydney and 14% in Perth.

Even the current Superannuation Minister, Jane Hume, conceded in an interview with the ABC that the scheme would likely boost house prices in the short-term.

"We know people will bring forward some of their decisions to buy a house earlier and for that reason it will probably bring up housing prices temporarily."

If the Coalition is re-elected, the Super Home Buyer Scheme will come into effect from July 1, 2023.

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