Super for a Home Deposit: Will it Actually Help Aussie First-Home Buyers?

With property ownership increasingly out of reach for many younger Australians, the debate over allowing first-home buyers to access their superannuation savings to purchase a home has resurfaced. Jordan Davies, a 28-year-old with a stable job and salary, reflects the sentiments of many, noting that despite feeling financially secure, the cost of property remains a significant hurdle.

“It’s still difficult to obtain finance in the amount that is needed to purchase a property,” he told ABC News. “The prices of property are so out of reach currently, for a single income earner. If you’re working hard in this country, you should be able to live the Australian dream.”

The Coalition’s Superannuation Proposal

Ahead of the May 3rd federal election, the Coalition put forward a policy proposal that would allow Australians to withdraw up to $50,000, or 40 per cent, of their superannuation savings to purchase their first home. This scheme aims to address the growing challenge of housing affordability. The current superannuation system generally restricts access to funds until retirement, with the primary goal of reducing reliance on the age pension. According to the Association of Superannuation Funds of Australia, the median superannuation balance at retirement (age 60-64) is around $330,000 for men and $250,000 for women, highlighting the potential impact of early withdrawals. (Association of Superannuation Funds of Australia, *Superannuation account balances by age and gender*, 2023.)

A key condition of the Coalition’s proposal is that the withdrawn $50,000 would need to be repaid to the superannuation account upon the sale of the property.

Economic Perspectives: A Divided Opinion

Concerns about Inflation and Inequality

Economists are divided on the merits of using superannuation for housing. Professor Rachel ViforJ, a prominent housing economist at Curtin University, expresses reservations about the scheme’s potential impact on the housing market. Her primary concern revolves around the inflationary pressure it could exert.

“I think there are two major concerns,” Professor ViforJ from Curtin University said.

According to Viforj, injecting additional funds into the hands of prospective buyers could lead to increased demand, ultimately driving up house prices rather than improving affordability. This effect has been observed with other first-home buyer schemes, such as grants and deposit assistance programs. Furthermore, Viforj suggests that the scheme may exacerbate existing inequalities.

“That will fuel demand for housing, and that will then push house prices up,” she said.

She argues that given the disparity in superannuation balances across different income brackets, higher-income earners, who typically have larger superannuation balances, would disproportionately benefit from the scheme, furthering the wealth gap.

“It’s the higher income earners who have more super to draw from,” she said. “Lower income earners usually have very little super in their accounts. So the scheme will likely help the higher income earners more than the lower income earners.”

Data from the Association of Superannuation Funds indicates that a significant portion of younger Australians have relatively low superannuation balances. Half of people in their 30s who don’t own a home yet have less than $30,000 in their superannuation account, modelling from the Association of Superannuation Funds showed.

Economist Saul Eslake’s modelling suggests that the average 25-34-year-old has just over $20,000 in their super balance, of which around $8,000 would be available to be withdrawn under a scheme where people could pull out up to 40 per cent of their balances for the purchase of a house.

Long-Term Impact on Retirement Savings

Another significant concern is the long-term impact on retirement savings. The Super Members Council has conducted modelling which suggests that withdrawing superannuation for a home deposit could substantially reduce retirement balances.

Modelling by the Super Members Council showed a couple who withdraws $55,000 combined super at age 30 would lower their superannuation balance at retirement by $149,000.

This loss of potential retirement income could place increased pressure on the age pension system in the future. Furthermore, the Council’s modelling indicates that the scheme could push up house prices overall by increasing demand.

Critics also argue that the potential long-term earnings achievable within the superannuation fund, through investment returns, could outweigh the immediate benefit of home ownership. This is a concern for Jordan Davies also as he makes considerations about the scheme.

“I wouldn’t take $50,000 out of my super — I don’t even know if I have $50,000 in my super. In fact, I don’t think I do yet,” he said. “I think that it would drain my my super to such low amounts I would consider myself to be depriving my future self of an allowance that could avoid me relying on welfare payments.”

Alternative Perspectives: Super as Collateral

Conversely, some experts argue that allowing access to superannuation for housing, if implemented carefully, could be beneficial. Former Reserve Bank economist Peter Tulip, now Chief Economist at the Centre for Independent Studies, suggests an alternative approach to minimise the impact on retirement savings.

“Super for housing is a good idea,” former Reserve Bank economist Peter Tulip said. “It can be done well, or it can be done badly.”

Tulip proposes using superannuation balances as collateral for a loan, similar to the “Bank of Mum and Dad” scenario, where parents guarantee a portion of the loan. This approach avoids the need to withdraw funds, preserving the long-term investment potential of the superannuation account. This would provide people with a larger borrowing potential without needing Lenders Mortgage Insurance.

“Not everyone has wealthy parents that can do that: they could use their superannuation balance instead,” Mr Tulip said.

Unlike Professor VirforJ , he argued that the super policy won’t perpetuate inequality as it will only likely be used by those who need it.

“Within the group of home buyers … this policy will mainly help those buyers that have difficulty getting a deposit together.

“So people that have generous parents or have substantial savings on their own will not use this policy much — it doesn’t do much for them, they can get the deposit anyway. This will really help people that have difficulty getting that deposit together, and they’re at the lower end of home buyers.”

Mr Tulip also believes the super for housing scheme should be expanded beyond first home buyers and be available to anyone wishing to purchase a home.

“There are a lot of people that want to buy a home that have substantial superannuation. The same reasons that you use it to apply for first home owners apply to other buyers.”

Superannuation Funds Already Invested in Property

Independent economist Cameron Murray points out that superannuation funds are already heavily involved in the property market through self-managed super funds (SMSFs), which allow individuals to invest their superannuation savings directly in property.

He argued that superannuation funds were already being used to invest in the property market, through self-managed funds that allowed properties to be part of a retirement portfolio.

Murray and other analysts have also argued that owning a home outright at retirement, even with a smaller superannuation balance, can provide greater financial security than being a renter reliant on a larger superannuation fund.

“The best asset to own when you retire is not shares [in your superannuation portfolio] but a house to live in,” he told ABC News. “People are paying into superannuation when they’re young and poor so they can have more money when they’re old and rich.”

It’s important to note that Murray is generally in favour of winding back superannuation as an Australian policy. Source: Industry research and analysis.

This article is based on a report from www.abc.net.au titled “Should first home buyers be able to use their superannuation to buy a house?”. You can find the original article here: https://www.abc.net.au/news/2025-04-15/first-home-buyers-superannuation-withdrawal-policies/105177444