Super for housing will favour higher income earners

At the same time the Federal Opposition seeks to make use of superannuation balances to help fund home deposits, major superannuation funds have released new research suggesting the major beneficiaries would likely be those already earning higher incomes.

The Association of Superannuation Funds of Australia (ASFA) has released analysis today in which it argues that those likely to benefit most are higher-income earners who get in early before such a measure drives house prices.

The ASFA analysis comes in the face of a campaign being spear-headed by NSW Liberal Senator, Andrew Bragg, to differentiate Liberal/National Party policy by strongly backing the use of superannuation for home ownership.

“However, as access to the measure increased, 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 in relevant sub-markets,” it said.

“All other things being equal, higher house prices would mean larger required deposits for potential first-home buyers,” the ASFA analysis said.

“In this regard, the measure would risk exacerbating lack of access to, and the unaffordability of home ownership for some,” it said.

“People who have lower superannuation balances and thus have a relatively low amount of funds available for a housing deposit, could in effect be priced out of the market for a first home – even with access to those additional funds,” the ASFA analysis said.

“Indeed, given that the measure would be likely to lead to higher house prices, and thus higher required deposits, the prospect of home ownership could become even more out-of-reach for those with low superannuation balances – a cohort which would largely comprise low-income earners.”

The ASFA analysis said that the impacts would be variable across Australian cities but that what was consistent across the capital cities is that for couples with a relatively low combined superannuation balance, the deposit requirement far exceeds the combined balance.

“Couples who are at the low end of the distribution of superannuation balances are also likely to be at the low end of the distribution for current incomes and accumulated savings outside of superannuation (a similar pattern applies to singles, however the gap between superannuation balance and median deposit is even greater),” it said.

“For such couples – for whom the binding constraint on a larger mortgage is the housing deposit – the additional funds from their superannuation account would be unlikely to be sufficient to reach the 20 % deposit thresholds. Conversely, at the top end of the distribution for combined superannuation balances, access to superannuation for a housing deposit – for those for whom the binding constraint on a larger mortgage is the housing deposit – could well facilitate the purchase of a first home,” the ASFA analysis said.

“However, it is also likely to be the case that those same couples would have purchased a (potentially cheaper) home in any case.”