Real estate agents: let first home buyers raid their super

By Leith van Onselen

The Real Estate Institute of Australia (REIA) has called on the federal government to allow first home buyers (FHBs) to access their superannuation to purchase a home. releasing the following press release:

“One of the biggest hurdles young people have in buying their first home is saving enough money for a deposit and the transaction costs. With rising house prices, the dream of owning a home is becoming difficult to attain,” Malcolm Gunning, President of the Real Estate Institute of Australia said.

“Surveys show that not only are aspiring homebuyers saving for longer but are also using debt to meet their deposit requirement including personal loans and credit cards.

“With first homebuyers finding it increasingly difficult to enter the housing market, home ownership in Australia is declining after four decades of stable levels.

“Many young people already have a partial deposit, access to their super would make the difference but they aren’t allowed to make the decision to access what is after all their own money until they retire.

“Too much attention has been focused on the accumulation of a nest egg through superannuation at the expense of other more practical considerations which not only improve the quality of life at an earlier age but result in a greater retirement ‘nest egg’.

“Superannuation and home ownership are both components of a retiree’s ‘nest egg’ and not competing products. By buying earlier in life retirees have every prospect of having a higher equity on retirement and a larger ‘nest egg’ on downsizing.

“It is nonsense to suggest that early access to superannuation for a home despot would undermine retirement savings and create new risks.
“Access to superannuation for the purchase of a first home could help reverse the trend of falling home ownership and address the looming social problem of large numbers of long-term renters aged 45 years and over remaining in the rental sector and possibly requiring rental support in later years.

“Accessing Super is not a radical idea. The use of retirement savings for a first home purchase has already proven to be successful in Canada, New Zealand and Singapore.

The REIA clearly has not studied economics, because there’s a term called the ‘fallacy of composition’, which arises when an individual assumes something is true of the whole just because it is true of some part of the whole.

Sure, allowing an individual FHB to access their super to purchase a home probably would increase their chances of home ownership, since they would have a leg-up on other buyers. But if you allow all FHBs to access their super, this advantage diminishes, and the end result will be home prices being bid-up for no ‘affordability’ gain, with the added downside of having less funds available in retirement.

The REIA’s claim that “the use of retirement savings for a first home purchase has already proven to be successful in Canada, New Zealand and Singapore” is also patently false.

Canada’s Garth Turner, who oversaw the introduction of a housing-super system in Canada in the 1990s, has admitted that it was a massive mistake – placing further upward pressure on Canadian house prices and putting at risk retirement savings – and has explicitly cautioned Australian policy makers against such a move.

Meanwhile, New Zealand’s housing market is the most expensive in the English-speaking world:

Global house prices to GDP

And home ownership rates have similarly collapsed:

NZ home ownership rate

It is the REIA’s complete failure to acknowledge the inflationary impact of allowing FHBs to access their super that is most galling.

Instead of backing policies that are guaranteed to add more heat to the market and inflate prices, how about instead supporting cuts to negative gearing and the capital gains tax discount, so that investor demand is diminished and FHBs are no longer out-competed and priced-out?

The answer, of course, is that the REIA doesn’t actually give a toss about making homes more affordable. All it is interested in is further inflating prices and turnover, so that it can line its own pockets.

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Comments

    • proofreadersMEMBER

      Yes – it has taken them this long to get motivated about their overwhelming self-interest, when so many of their agent members are doing it enough. Needs to try harder?

    • I’m pretty against raiding the super. But from the perspective of foreign owners, surely the FHB will have a bit to gain by having more capital at hand, compared to a foreign that will still have their dirty money, but no super.

      • Yeah weaponise the FHBers to bid up house prices with their super just before the ass falls out of the whole thing
        What a great idea

  1. LabrynthMEMBER

    Slum-agent millionaire!

    I sure do hope they have been saving their pennies. I truly think we have more realestate agents than lawyers around.

  2. It will result in a sudden influx of FHBs in their 30s and 40s with a decent nest egg in super suddenly entering the market. That will consequently push up prices and then leave a gaping fall in demand as the remaining FHBs that have little super unable to enter the market at the increased price level. Combine that with the removal of NG and CGT changes when Labor gets elected and suddenly there are few investors and fewer FHBs resulting in a sharp drop in demand and a subsequent fall in prices. All the FHBs who used their super suddenly see their equity plummet and are left in a pickle.

    • Not sure in Sydney and Melbourne as I don’t think the average punter has enough in super to bridge the gap. Could get other parts of the country bubbling though?

  3. Aren’t these the same Real Estate Agents that knowingly sell houses to illegal Chinese buyers, while shitting on FHB’s.

  4. ceteris paribusMEMBER

    It’s a fruitless argument, isn’t it? The great Morrie came out yesterday to say it wasn’t on, according to the ABC. Morrie gets what Morrie wants.

  5. Can you tell us what potato farmers think about the nutritional benefits of potatoes ? Or maybe ask Tobacco growers the health effects of Tobacco.

    Next up on Macrobusiness : The effect of wind on windmills.

  6. SoMPLSBoyMEMBER

    Often overlooked / forgotten is just how much effort is applied to the ‘marketing’ of Strayan property. This enormous and relentless campaign is a requirement as without it, most ‘options’ would stand as they really are-;mildewy, poorly built / maintained, ridiculously over-priced dwellings within population choked cities that require insane levels of debt servitude.
    All, for the privilege of announcing ‘it’s my house’?
    Ignoring the ubiquitous and powerful marketing / cult approach to simply buying a home, leaves a financial move that defies all logic and good sense. I suspect that it will be the ‘collapse’ of property ‘faith’ that signals the great unwind and this may not be connected to any economic measure as expected. There’s a very fine line between ‘all-in’ and ‘ nah, not a chance’.

    • TailorTrashMEMBER

      Given that the talk of “bubble ” is now getting a lot of traction in the MSM one has to wonder if the punters might just start to balk at the asking prices and potential for a pop……doubt it though this property religion is pretty ingrained .

      • SoMPLSBoyMEMBER

        Dunno TT. The chapter has yet to be written. I’m sure there’s a formula (1/X) which will describe the velocity of flight ‘away’ from this madness to be directly correlated to the force being applied to keep it all ‘going’.
        If there’s any evidence that prices are slowing / stagnant/ declining ( the death sentence of all Ponzi’s) then the direction could change and fast. For those I know that have splashed on the buyer’s cologne, their ‘expectation’ of what will occur aligns only with success and never failure. That’s some ‘religion’ considering the levels of finance commitments and ‘downside’ that’s certainly getting a mention in the today press.
        .

    • JonathanMEMBER

      This. Many people have no idea what could (will) happen. How about a concerted campaign to knock this confidence fairy off its perch? There is a new swanky shop pimping an off the plan apartment complex near me (replacing shop that actually provided a service to the community). I am tempted to print a load of article off and hand them out at the door or poster them all over the place. Roger Montgomery’s latest piece would be a good start.

  7. There probably is no more mercenary and ruthless lobby group in Australia than the REIA.
    They singlehandedly killed “NG for new builds only” by convincing the PCA and the HIA to advocate contrary to their members interests.
    They killed FIRB reform
    They are the cancerous heart of the FIRE economy

    • +1.

      OTOH, if stamp duty were replaced by land tax, a barrier to turnover would be removed, so that REI members would get more commissions. And if a big fat land tax or vacancy tax were to shift the homeless into previously empty apartments and enable more grown-up kids to fly the nest, REI members would get more rental management fees. For reason like these, it ought to be possible to split the FIRE sector.

  8. reusachtigeMEMBER

    Real estate agents are only trying to help out first home buyers you cynical bstards!

  9. It is a testament to the insidious power of the REIA that this completely discredited idea is still alive
    Having the most powerful media tycoon in the world as your major shareholder buys some serious airtime

  10. There’s a property that will go for 500k this weekend but with my deposit of 5k I can’t get it. I get another 45k from my super and now I own this property for 500k. Property falls significantly during next recession, first home owner loses job and gets forced to sell for $350k. Now he has a mortgage debt of $150k and 45k less super for retirement. All the property bulls would say this could never happen but it could.. When a government is encouraging taking on huge debts to play against some of the most ferocious competitors (Property speculators) it is surely a recipe for disaster.

    • And if the punter is then forced into bankruptcy, is the money that was previously held in super fair game in the liquidation process?

  11. Meanwhile in other news;

    Audi dealerships: let first home buyers raid their super
    Ice dealers: let first home buyers raid their super
    Table top dancers association: let first home buyers raid their super
    …………..the list is long and distinguished. What a way to build a nation.

  12. Talk about self interest – ok, how about some much needed self interest from the other side – how about:
    1. Cut immigration back to 50,000 per year
    2. Introduce anti-money laundering rules for real estate agents, accountants, lawyers, trust managers etc.
    3. Publish every property that is bought and sold in a publicly available register – where the actual person is identified who buys or sells (not the trust or company). Include exactly what it was bought or sold for.
    4. Publish and peruse criminal prosecutions for those who launder money into Australia and those who assist and aid in the facilitation of money laundering (whether it be through shell companies, trusts etc). Make ignorance a non-defendable excuse. Hike up the penalty rates 10 fold and in addition, provide prison sentences for a minimum of 5 years – non-parole period as well as selling off the property with all proceeds going back to public funds.

    • blacktwin997MEMBER

      Russell, are you seriously suggesting that politicians actually start looking after their country and people rather than foreign criminals and parasitic lobby groups?

  13. Kudos to Bowen and Shorten for taking on these frauds
    They do so at great political risk

  14. This was discussed on Paul Murray live last night. Podcast here (http://www.skynews.com.au/connect/podcast.html) – 39:30 – 44:00

    One interesting point raised that I hadn’t thought of: if you allow access to super then people will intentionally buy a more expensive house and not pay it off to ensure they receive the pension. This is a similar point that Cameron Murray raised on the weekend regarding pensioner downsizing incentives being misused to lock up even more wealth into PPOR and maximise their pension.

    • As a policy, it is a big steaming pile of sh*t no matter which side you examine it from. Plenty of identifiable negative consequences and outcomes. The best part is that it will actually have the opposite effect of that intended, it will make housing less affordable. These people need to be sent to a gulag!

  15. Jumping jack flash

    Maate you can’t lose!

    Get that super into houses. Government guaranteed capital gains.

    Why even bother with super? Any super fund worth anything would be heavy in property already. Cut out that middle man and live inside your nest egg. Just buy a house and give what would have been your super contribution directly to the bank to pay it off.

    An average 1 million dollar house bought when you’re 20 will, at the very least, be worth 5million when you’re 60. And that’s government guaranteed. If you’re in Sydney it will probably be worth 10million because it’s just so awesome there. Plenty of space. Punctual, uncrowded public transport.

    Then when you retire, flip to a foreigner for all those sweet, sweeet capital gains, downsize, and live off your millions.
    A brilliant solution.

    Problem, super funds?

  16. MediocritasMEMBER

    If they really cared about affordability then they’d be working to bring asks down towards the bids, not the other way around.

    Adding money to the bids simply leads to the asks being lifted. It does nothing to improve affordability and only makes the bubble even more dangerous.

    Prices for real estate have a solid floor, so long as there are plenty of warm bodies around, because people will always want a place to live. Disincentivising speculation (eg, removing negative gearing), therefore has a limited downside to prices and will work well to safely improve affordability. Conversely, the sky is the limit as to how high prices can go if speculation is incentivised.

    TPTB are so utterly full of shit when they talk about “afforability”. In a Propertocracy, their primary directive is to increase the profits accruing to the Propertocrats and that’s exactly what raiding super for real estate purchasing will achieve.

  17. The very fact that it will raise property prices is the reason it’s on the table.

    However, listening to Ross Greenwood on the radio yesterday, he was saying there is another problem with super for property and it might not get off the ground because of this: the bank would take the property in the case of bankruptcy, however they cannot touch the super of a bankrupt person. If there is a downturn, then the bank loses out, therefore they wouldn’t lend to a person using super for their deposit in the first place.

    • Even StevenMEMBER

      Yes, a bank will only consider collateral it can get its hands on. I presume with this ‘allow access to super for FHBs’ that the money would be pulled OUT of super to enable it to serve as valid homeowner equity (from banks’ perspective).