Why this accountant says using super to buy your first home is a stupid idea … and stupid government policy

real estate super

Now before you start calling me a Liberal basher, let me set the record straight — I dislike all political parties equally!

Government policy is rarely about the greater good and mainly is used for attempting to win votes (read bribe? Verb; dishonestly persuade (someone) to act in one’s favour by a gift of money or other inducement.)

The Coalition’s media release on May 15 stated: “Under the Super Home Buyer Scheme, home buyers will be able to invest up to 40% of their superannuation, up to a maximum of $50,000 to help with the purchase of their first home … When you sell, the amount you invested is returned to your super — plus a share of any capital gain.”

As always, such policies are ill-thought out and never delve into the what ifs. In this case, that includes:

  • What if the property goes down?;
  • What happens at death?;
  • What happens in the case of divorce?;
  • What if the house if not sold when a taxpayer is potentially eligible for an aged pension?;
  • If there is a gain and it is returned to a superfund, what are the tax implications?;
  • What if the price goes down and the value is less than the loan — will the super portion be taken by the bank?; and
  • Is a limited recourse borrowing arrangement required? Will banks be charging a higher interest rate due to having less security?

This policy will provide a flow of new entrants into the property market, leading to an increase in demand, then upward price pressure. Even Superannuation Minister Jane Hume has admitted that Aussie house prices will jump up ‘temporarily’ as a result of the government’s new home buyer scheme. That is the opposite of what the policy alleges to achieve, which is to make property more affordable.

In my mind it is a band-aid solution. Over the years, the state and federal housing incentives and strategies have grown to cash grants, stamp duty exemptions, ultra-low interest rates and now using superannuation. As prices have gone up, so have the incentives and so on and so on.

Lobbyists for banks and property developers seem to have the government tied around their little fingers. The only lobbyists that are ever listened to by politicians to are the ones making profits for themselves and not for the better of society. I personally have lobbied in Western Australia for a meeting with the Premier, Education Minister and the assistant Education Minister regarding improving the state of Financial Literacy in schools in WA, with no success to even secure a meeting (let alone commence meaningful change). If anyone has a spare $10,000 for a seat at a political dinner…

Having the price of property increase by more than inflation over the long term is a bad thing for society as a whole. An ever increasing share of income is being used to service mortgages, even in an ultra-low interest rate environment. This leads to less disposable income to be spent on anything else in the economy.

No politician has the intestinal fortitude to do what is required to slow the growth of property to a rate around the inflation rate. I would like to see the concessions tapered off over time and a limit of two properties per person. First home buyers also need to moderate their expectations. A single person does not need a four bedroom home.

My lovely wife Kate has heard me talk about all things money for 20 years. And I can just hear her saying “this has something to do with eggs and baskets, doesn’t it?”, when it comes to putting more than 100% of your wealth into one single asset.

I personally would like property be a social good and not an investment class. I don’t have all the answers, but the options presented by the major parties are a step in the wrong direction.

Disclosure: I have interests in both residential and commercial property. The proposed policy will probably make me money. But sometimes you have to look further than your own circumstances to decide what is better for society as a whole.


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