My previous article (Unintended Consequences of Super) discussed how super is set to comprise an increasing proportion of people’s remuneration. Leaving them with less money in the here and now.
In effect, people are forced to trade off the quality of their current lifestyle to prepare for a “happier” retirement. Which for younger people could be 30-40 years away.
In the meantime, they have less income and a reduced capacity to borrow. And in the current market of high prices (and rents), it’s placing a first home out of reach for many. Which itself has been partially distorted by the vast pools of money going into Super and the associated tax concessions.
In one generation, the probable reality of home ownership for most Australians has morphed into a dark fantasy.
Little wonder that many parents are worried about the affordability of housing for their children and that the bank of mum & dad is the fifth largest financier of their children’s mortgages. With the average “gift” in NSW estimated to be $92,000.
But it does not have to be this way.
A way forward for first home buyers?
What if we could we help younger people contribute to and meet the objective of Super (reducing the government burden of aged pension) AND leverage that to help them buy their first home?
Without putting inflationary pressure on housing and so defeating the purpose of this new arrangement?
The current proffered answer in NSW is a shared equity model with the government coinciding with a change from stamp duty to a land tax. Reducing the impots on the purchase.
However, shared equity with Governments is always fraught. There is the loss of personal autonomy, and the homeowner is vulnerable to the whims of politics and policy changes.
The way forward must meet two key tests:
- It does not lead to inflationary pressure on the already over-priced housing market.
- The Super fund is not financially compromised – in other words it still earns money from this investment.
What if young people could access their super (and/or that of their parents) to contribute to the house purchase; and the super fund was repaid both by interest payments and a proportionate increase in the value of the property?
Your thoughts?
Feel free to email me and tell me what you think.
Joel Curry.