It’s no secret – Australians are currently faced with record low housing affordability. Home prices have climbed faster than our incomes, and while the private and public sectors are both doing what they can to help, some first home buyers (FHBs) say it just isn’t enough.
One proposed solution is to allow FHBs to use their superannuation money to come up with a deposit. This has always been an option for self-managed super fund (SMSF) trustees, but should the everyday buyer be allowed to tap into super to buy property?
The government has weighed in, and the new budget includes provisions allowing FHBs to access a total $30,000 from their superannuation as part of a new First Home Super Saver Scheme.
Not everyone is happy with the decision, however, which has gained the attention of buyers, lenders, advisers and legislators.
Using your super to buy property>
Superannuation often equates to compulsory retirement savings, but with a whopping 9.5 per cent of earnings going straight into super, many Australians are looking to tap into the funds.
SMSF members have long enjoyed the benefits of investing with their superannuation. An SMSF makes you the trustee – you design and implement your own investment strategy to help grow your nest egg. Because there’s so much at stake, however, experience is essential. If you don’t have the right investment knowledge, opting for an SMSF is a very risky choice.
Under the new provisions, FHBs won’t be made trustees in their own superannuation fund, they’ll merely be allowed access to voluntary contributions up to $15,000 per annum and $30,000 overall. With nearly 90 per cent of Australians non-property owners worried that they won’t be able to afford their first home, according to CoreLogic’s “Perceptions of Housing Affordability Survey,” this represents the first hope of getting on the property ladder for many FHBs. >
It’s not a solution
Opponents believe allowing FHBs superannuation access is an irresponsible practice that doesn’t offer a comprehensive solution.
Critics think that encouraging FHBs to tap into superannuation is a band-aid solution at best. If we want a real solution to housing affordability, it should come in the form of tax breaks, grants and tightened regulation on foreign investors.
Considering these new mandates, FHBs will need more help navigating the home buying process than ever before. Working with the right mortgage advisers is essential.