One of the hot topics at the moment is what to do with first homebuyers and how do we get them into the property market. This is born of the fact that we have seen increases in the property market after a period of stagnation in property values.

If we are going to look at allowing first homebuyers to use their Superannuation to help them secure a home we need to ask ourselves truthfully will this actually help or hinder the market and will it actually solve the problem or just create a new one.

Yes there are massive benefits to home ownership more so than purely financial, it gives people a feeling of belonging to a community and allows them to live somewhere they feel secure and they have an exclusive right to use as they see fit.

It also means more people will be able to benefit from one of the biggest tax breaks you are able to receive in Australia and that is the fact you don’t pay tax on the profits from the sale of your principle place of residency. To me this is one of the greatest tax breaks available and incentives to home ownership. I regularly advise my clients of the benefits of home ownership and even using your home as a vehicle for future wealth creation into retirement.

As we have seen on countless TV Shows people can buy and renovate a home and hopefully sell it for a profit in the future. Does this mean everyone will succeed at this approach, no, some will fail and lose money and some will succeed and make a profit.

But does this mean it is your right to own a home as I have heard many social commentators say it is in Australia; is it your right to make a profit from an investment market? Of course not. Yes even owning your own property is about entering an investment market, and a hint the answer to that question is No as well.
I truly believe that allowing people to use their Superannuation to help purchase their first home will actually not help anyone and may actually contribute to widening the gap between those that can afford property and those that can’t. The reason behind this is known as the trickledown effect, most people only look at the surface and how it affects them at the start but not what the whole process will cause further down the line.

By allowing people to use their Superannuation to secure their first home it will mostly cause a mini rally in the property market as people in certain sectors of the market suddenly have slightly deeper pockets. Now an increase in prices is great for those that already own property but it may lead us to a situation in a couple of years where we are having the same debate again. I seem to remember the first homeowners grant was going to cure the same problem and look where we are now. It is widely acknowledged that while it did help first homebuyers afford the costs associated with purchasing a house it also meant they could spend more on their property purchase which pushed the market along even more and now we have another so called affordability crisis.
I am also concerned by the comments Social Commentators are making in their belief it is a right to have your own home, I know it’s not a popular statement or thought but it is not the Governments responsibility to make sure every person can afford a house. I agree the Government should provide the ability for every person to be safe and have a roof over their head but that doesn’t mean home ownership.

Also I believe this is a bit too simplistic for my liking as I can just imagine what will occur when we start seeing this idea filter through the market as it ignores basic economics. Those who earn more have more Superannuation, thus they will be able to afford to spend more than those who earn less. We will see our social crusaders up in arms that the wealthy are now controlling more of the property market than they did before. This means that housing affordability will be out of reach of even more people as we start to see a bigger consolidation of wealth in the economy. The idea of using Superannuation is a blunt instrument like a hammer when really people are searching for a precision jewelers hammer, just because they both have the name hammer doesn’t mean they are interchangeable.

Mark Wyld from MW Wealth points says “Increasing housing prices does make it more difficult to get into the market as a first home buyer however it is not the only reason. If you look underneath the bonnet of why people cannot afford their dream first home is because they simply do not have the ability to save and tuck money away for a rainy day. ”
One facet of the economy that people always seem to forget about is renters, I just wanted to touch on this point as not everyone wants to own their own home. Some people are happy renting from a lifestyle point of view. If we have more owner occupier we naturally have less investors, this will then create a shortage of rental properties, then what do we allow people to forgo paying Superannuation to allow them to pay rent as it goes up.

My final concern really relates to the worst case scenario that is we allow people to use their Superannuation to secure their first home. As I have mentioned above we see this create a little bubble and with that the Reserve Bank raises interest rates to quell the market volatility (it could happen). What happens then when all these first home buyers have to sell because they can no longer afford to hold their property? Do they have to pay the Superannuation back to their fund, do they not owe their fund anything, and then what happens down the track when they want to retire and they bought the wrong property which hasn’t increased sufficiently in value and now they not only have an under performing investment but they have no Superannuation either.
See it is very easy for the purveyors of social equality to come up with these ideas but it’s the implementation that is actually the challenge in how to make it work for everyone and not just those who they deem to need the help.

For every instance where Government gets involved in a free market it ends badly, sometimes it must be remembered that having a safe roof over ones head should be guaranteed by Government but Government cannot guarantee home ownership for everyone.