Warnings about using Superannuation to buy a home

The Association of Superannuation Funds of Australia (ASFA) has warned against the potential pitfalls of allowing Australians to use their superannuation funds to buy homes, arguing it would likely worsen the already severe housing affordability crisis. This comes amid ongoing debates about the role of superannuation in addressing long-term housing market imbalances.

ASFA's recent analysis indicates that the median house price in capital cities has risen by approximately 7% annually since 2000, significantly outpacing the average growth in full-time earnings, which stands at 3.8% per annum. This disparity has widened the gap between house prices and what average earners can afford, making the dream of homeownership increasingly elusive for many.

The report highlights a critical issue: those with lower incomes and consequently smaller superannuation balances, could find themselves even further removed from homeownership. The analysis suggests that accessing superannuation funds for home deposits could inflate house prices further, requiring even larger deposits - a counterproductive move for those it aims to help.

For instance, no individual or couple aged 25-34 in Sydney could afford a median-priced house or unit deposit by solely tapping into their superannuation. In Melbourne, the situation is similar, with prospective buyers unable to gather sufficient funds for a house deposit through their super alone.

ASFA Chief Executive Mary Delahunty emphasised the importance of addressing supply-side issues in the housing market rather than depleting retirement funds, which are meant to secure financial stability in later years. Delahunty points out that while using superannuation for housing might benefit a small segment of the population, it fails to address the broader, structural challenges that continue to drive the housing affordability crisis.