ScoMo’s Super Home Buyer Program will make the Australian property market even crazier

Ahead of the Australian federal election, Prime Minister Scott Morrison has proposed a new scheme that allows first-time home buyers to use up to $50,000 of their superannuation to purchase a home. However, the plan may not benefit the people for whom it was designed..

Australian Prime Minister, Scott Morrison (ScoMo) has unveiled a controversial new initiative to help Australians buy homes. ScoMo has told Australian voters they should be allowed to use their super funds to buy their first home, making the policy the main attraction of its election campaign.

ScoMo’s first-time homebuyer grant policy will allow first-time homebuyers to use their superannuation to access up to 40% (or a maximum of $50,000) for a deposit on their first house if the Liberal Party wins the next election.

“It’s your house and it’s your super!” ScoMo said at the Liberal Party’s campaign launch in Brisbane.

While ScoMo might think letting people dig into their super to buy a home is the right way to keep the economy going (and maybe win an election), most financial experts aren’t exactly thrilled about it. idea – for several reasons.

DMARGE spoke to Catherine Mapusua, head of lending at Australian digital lending provider, WLTH to get his thoughts on what ScoMo’s policy means for Australians.

Mapusua said the new policy, although called a “First Home Buyers” grant, will do little to help young Australians buy homes. In fact, it will mainly benefit the elderly who have a substantial amount of retirement pension.

“I personally think it helps those who already have a more secure financial future at the expense of those who need it most – It mainly benefits older generations who have a substantial amount in their retirement pension and do not yet have bought their first home

According to the Association of Superannuation Funds of Australia (ASFA) – the authority on all things super – the average superannuation balance for a 30-year-old Australian is around $20,000, which will only not much to move the meter on a 5% drop in Sydney where the median house price sits at $1.6 million…

“As house prices rise further with new demand, it is more difficult for young Australians who don’t have a large superannuation to enter the market,” Mapusua added.

The policy also betrays the whole point of retirement, especially for younger people, which is to ensure the long-term growth of funds for a comfortable retirement. By encouraging the youngest to retire earlier to buy a house in what is called a “totally overheated“property market – ScoMo potentially robs young Australians of the power of compound interest.

The earlier and more regularly young people contribute to a good super fund, the more money they will have saved for retirement. If you’re thinking of upgrading your pension, you can read DMARGE’s review of the best Australian superfunds here.

While the grant has been widely criticized for its lack of effectiveness for young Australians, Mapusua said a key benefit was that the scheme could help ease interest rate stress.

“As interest rates are expected to rise in the near future, the need for a large deposit is further emphasized to avoid mortgage stress from overwhelming loan repayments.”

Ultimately, ScoMo’s housing pledge appears to be an ill-planned attempt to win last-minute votes by getting louder on “housing affordability” in the days leading up to the next election.

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Penny D. Jackson