We’ve renewed our call for first home buyers to be able to borrow from their superannuation account towards their deposit based on a new study: “Superannuation and Housing: growing the cake and eating it too“.
Our modelling shows that over the last 5 years an investment in the average Australian house would have returned a first home buyer with a 5% deposit a 15.57% pa return on equity, compared to 6.0% pa from the average superannuation scheme.
Part of the high return is a result of gearing, but even when we modelled a house with no gearing the return was 5.99%.
This suggests that the financial performance of the owner-occupied home will be better than superannuation in the early stages of ownership, and decline to a rate which is similar to that of superannuation over the longer term.
It is well-established that retirees who rent are in much more financial stress than those who own their home outright. A holistic view of retirement would see home ownership as the number one priority, which is only then followed by superannuation. Not only does a house have investment value, but it also provides shelter, and with high equity, reduces daily expenditure.
Our Housing Affordability Index shows that house repayments are very affordable on an historical basis, as well as compared to renting, and that the main difficulty for borrowers is finding a deposit. It takes 53% longer to save for a deposit now than it did in the 1990s, yet we are saving more than ever because of the money being put aside in superannuation for retirement.
If home purchasers could access those savings the deposit gap would diminish to historically normal proportions. This decrease in affordability coincides with a decline in home-ownership from 76.1% in 1994 to 69.8% now.
Our proposal comes with the proviso the borrower pays the money back into the superfund over time, with interest, so that the capital in the superfund would be preserved. In fact, because a home owner pays no rent, the worker would be in a better position to make additional voluntary payments into super later in life if they bought a home as early in life as they could.