Independent Senator Nick Xenophon has said he will introduce legislative changes in the spring session of parliament to allow first home buyers to access their superannuation savings to pay a house deposit.
Xenophon sits on the Senate Economics References Committee Inquiry into Affordable Housing, which this week was conducting hearings in Adelaide.
The inquiry heard that in Canada up to $25,000 (Canadian dollars) can be accessed for a first home, making a dramatic impact on housing affordability.
Senator Xenophon said that after examining the Canadian model he would be moving for changes to the Superannuation Act 1976 to allow the release of superannuation funds for a first home with similar safeguards to the Canadian scheme. In Canada the amount borrowed from the house buyer’s super fund has to be paid back into the fund within 15 years.
“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,” said Xenophon.
“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.”
Housing affordability in Australia has fallen for the past three decades as house prices have continued to outstrip income growth. An affordability survey by Demographia conducted this year found Australia had the second-worst housing affordability in the world, behind Hong Kong.
All 39 Australian housing markets surveyed were categorised as ‘seriously’ or ‘severely’ unaffordable, defined as having average house prices more than four times average income.
New Zealand, Canada and Singapore operate schemes which allow some access to retirement savings to be put towards housing. The Senate committee is scheduled to give its report to parliament in November.
Meanwhile some independent financial analysts have downplayed the beneficial impacts of such a scheme. Callam Pickering, writing in the Business Spectator, said that improving affordability cannot be achieved by increasing the demand for housing.
“This policy proposal would have a similar effect to increasing the First Home Owner Grant. Although quite popular, that scheme has been an unmitigated disaster that has effectively operated as a wealth redistribution vehicle from younger to older Australians.”
Pickering points out that despite the FHOG program, ownership among 25 to 34-year-olds fell from over 60 per cent in 1981 to around 48 per cent in 2011, and that for those between 35 to 44 years old, ownership rates have dropped some 10 percentage points over the same period.
“According to the Council of Australian Governments, the FHOG program has encouraged first-home buyers into the market but that hasn’t resulted in greater home ownership.”
“Of more immediate concern for housing affordability is the fact that the FHOG quickly becomes incorporated into price expectations for existing property,” says Pickering.
“In the short run, the supply of housing is largely fixed, which naturally results in higher prices. Consequently, these policies merely create the illusion of greater affordability and fool younger Australians into taking on a considerable debt burden.”