Recent announcements about first home buyers being able to access their superannuation to purchase a property has sparked a lot of debate among experts.
With property prices increasing and some first home buyers struggling to compete with investors, Treasurer Joe Hockey has suggested the idea of allowing first home buyers to access their superannuation savings in order to boost their deposit.
According to the Real Estate Institute of Australia, home buyers should be able to borrow from their own superannuation to help pay for their first home.
“It doesn’t destroy superannuation as a nest egg, and (that money) being used on another long-term asset purchase such as a house can minimise rent into the future,” Real Estate Institute of South Australia chief executive Greg Troughton said.
“The biggest impediment getting young people into their first home is saving that deposit ... they have an asset there they can’t touch, it makes sense that we think outside the square.”
However some within the superannuation industry believe these funds should be saved for their sole purpose. Marinis Financial Group director Theo Marinis believes that the new legislation could undermine the whole superannuation system.
“The whole point of super is to keep those assets totally separate, as risk free as possible, so you diversify your investment pool and the government gives you tax concessions so there is a pool of money there when you retire.”
So what are the pros and cons of first home buyers using their superannuation to purchase their first home?
Purchase property sooner
The aim of this new legislation is to give first home buyers the opportunity to enter the property market sooner. With rising house prices, higher cost of living and tighter home loan requirements, purchasing property is becoming out of reach for many young buyers.
According to senator Nick Xenophon, there is a similar scheme in Canada which allows first home buyers to access up to $25,000 of their superannuation and this has led to improved housing affordability. He also believes this similar plan can help improve affordability here in Australia.
Low retirement income
One of the possible problems of allowing young buyers to access their superannuation now is that they may end up being disadvantaged when they reach retirement. If Australians using a chunk of their savings now, they may not be able to afford the lifestyle they would like in their retirement years.
Higher contribution rates
If more funds are going towards purchasing property, then higher super contribution rates will be needed to replace lost retirement income.
As a result, a larger per cent of a person's income could be used to put towards their superannuation, making the cost of living even harder to afford.
If you are a first home buyer looking to purchase a property and you're not sure about how to save for a deposit or what option is best for you, our team can help. Give our Lending Specialists a call on 13 72 62 or enter your details here and they can contact you and work with you to help you understand.