2017 Budget Winners: First Home Buyers able to use Super as a house deposit
Related Post: First Home Buyers using Super to enter the market?
First home buyers will be able to access superannuation savings to buy property, the Government has announced.
The measures are contained in the 2017-18 Federal Budget, released yesterday, whereby FHBs will be given access to voluntary super contributions of up to $15,000 a year and $30,000 overall, with withdrawals taxed at marginal rates. Contributions can only be made from 1st July 2017 and withdrawals from 1 July 2018, delaying the impact on first home buyer demand.
Real Estate Institute of Australia has welcomed the measure. “Allowing first homebuyers to build deposits with superannuation through voluntary contributions is welcome”, commented president Malcolm Gunning, “Whilst REIA has advocated for a more aggressive approach to bridging the deposit gap by allowing first home buyers access to existing balances in superannuation accounts the Government’s initiative will reduce the time taken to save for a deposit by around 25%.”
Not all experts agree FHBs should be able to access their super. Comparison website Finder.com.au surveyed 24 of their economists' panel and found 80% against letting FHBs access super. “Allowing young Australians to access their super to facilitate a property purchase could jeopardise their future as it may mean they don’t have enough funds to cover living expenses once they hit retirement age,” explained Finder insights manager Graham Cooke “additionally, this could add fuel to the fire by creating further demand for housing, thereby ballooning property prices.”
On Monday Corelogic released a housing affordability report which warned against letting first home buyers access their super. “Freeing up of cash for first-time buyers can increase demand and without equal measures to improve supply drive prices up at the lower end of markets” noted the Perceptions of Housing Affordability Report. The Budget has measures to improve the supply of community housing and infrastructure to encourage home building in outlying suburbs.
Given FHBs will have to wait a year to access their super and will have to make those contributions themselves it is questionable how much of an impact $30,000 could have. The median dwelling price in Sydney increased by almost $120,000 from April 2016 to April 2017 and $90,000 in Melbourne, according to Corelogic’s Home Value Index.
The Budget also sets out extra taxes for foreign investors and minor limits to the tax claiming abilities of landlords: look out for more coverage in tomorrow's MPA newsletter.
An easy to navigate summary of the 2017 Budget can be found here: http://www.abc.net.au/news/story-streams/federal-budget-2017/2017-05-09/federal-budget-2017-winners-losers/8505738