Draining entire superannuation savings wouldn’t cover most young couples’ home deposits, research finds

<span>‘Accessing superannuation is not the silver bullet to solving Australia’s housing crisis,’ the Association of Superannuation Funds of Australia warns.</span><span>Photograph: ImagePatch/Getty Images</span>
‘Accessing superannuation is not the silver bullet to solving Australia’s housing crisis,’ the Association of Superannuation Funds of Australia warns.Photograph: ImagePatch/Getty Images

Young couples would struggle to scrape together a 20% deposit for a home in Sydney or Melbourne even if they were allowed to completely drain their super, new research by super funds has revealed.

Research by the Association of Superannuation Funds of Australia casts doubt on Coalition plans to expand its super for housing policy by finding that of couples aged 25 to 34 in Sydney, even those in the highest income decile, could not raise more than $150,000 from super for a 20% deposit on the median apartment.

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In Melbourne, only in the richest 20% of households would couples aged 30 to 34 have enough for a deposit on the median apartment, or $120,000, from super.

The research did not calculate the impact on someone’s retirement income of draining their super account but noted that several reviews of the superannuation system had recommended against it.

One week before the 2022 election the Coalition proposed allowing first home buyers to access up to $50,000 of their super for a deposit on the condition they pay the lump sum and a share of any capital gains back into super upon sale of the property.

The Coalition is now looking to increase the amount that can be withdrawn and to expand the policy beyond first home buyers, by allowing others to park super in a mortgage offset account to lower interest payments.

The Asfa research examined a sample of 300,000 taxpayers, in combination with Australian Bureau of Statistics data, to assess the distribution of superannuation balances for prospective first home buyers aged 25 to 34 across Australia’s major capital cities.

In Brisbane and Adelaide the top 30% of couples aged 30 to 34 could achieve a 20% deposit on an apartment by draining their super, while the top 10% of couples aged 25 to 29 years old could do the same.

In Perth the top 50% of couples aged 30 to 34 could afford a deposit for a unit by draining their super, while the top 30% could do so for a house.

Although affordability varied across capital cities, “what is consistent … is that for couples with a relatively low combined superannuation balance, the deposit requirement far exceeds the combined balance,” the Asfa report said.

“Overall, the data suggests that an early release of superannuation measure would largely be used by the minority with higher superannuation balances, a group who often achieve home ownership in any event.”

Asfa noted that for low-income households “the binding constraint on a larger mortgage is expected (future) household income (for loan servicing)”, meaning that “an increase in the funds available for a housing deposit would lead to a much smaller increase in nominal purchasing power” relative to higher-income households.

The association warned that “additional nominal purchasing power available to prospective first home buyers (again, likely to be higher-income earners) would be competitively bid into higher house prices”, meaning that those with smaller super balances “could in effect be priced out of the market for a first home – even with access to those additional funds”.

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The Asfa chief executive, Mary Delahunty, said: “Worsening housing affordability presents a significant challenge. Asfa supports the aspirations of young people to buy a home and agrees everyone deserves a secure place to live, particularly in retirement.

“Accessing superannuation is not the silver bullet to solving Australia’s housing crisis.”

Before the 2022 election, the McKell Institute modelled accessing super for housing, finding it would both push up prices and disadvantage people in retirement, given that super has historically outperformed the housing market.

The new shadow assistant minister for housing affordability, Andrew Bragg, told Guardian Australia that claims of a price impact were “massively exaggerated” and the Coalition policy would be accompanied by measures to increase housing supply.

Brendan Coates, the economic policy director at the Grattan Institute, agreed that modelling by the Super Members Council suggesting a $75,000 price rise in Sydney “seems too big” but said the policy “certainly would raise prices”.’

Asfa analysis of the 2020 Covid-19 early release scheme found that nearly 1 million Australians closed or largely cleaned out their superannuation accounts as a result of early release payments, with the vast majority of recipients aged under 35.