Using your super to buy your first home

Is it really going to help young buyers, or merely take away their retirement savings? We take a look into this super debate.

Pro 1: Access to the property market sooner

According to Senator Xenophon, the aim of the legislation is to give first-home buyers faster entry into the property market. With home prices on the rise and tightening loan-to-valuation ratios, the property market is increasingly out of reach for many young buyers. New laws seek to radically change all that.

Pro 2: Regulating market affordability

The South Australian senator says a similar scheme now operating in Canada which allows up to $25,000 of retirement savings to be accessed has led to improved housing affordability; he seeks to propose the same thing this spring in federal parliament.

Con 1: Retiring on a shoestring budget

A foreseeable problem with the scheme for many is the potential for many first-home buyers to be disadvantaged at retirement time. According to many, including the Association of Superannuation Funds of Australia, the likelihood of this scheme would lead to many people being unable to fund the lifestyle they wish to live in their retirement years.

Con 2: Pressure on higher contribution rates

Another concern is that diverting the funds from super into the property market, higher super contribution rates will be needed to replace lost retirement income.

This means that more of our salaries and wages could potentially be swallowed up and locked into superannuation.

Con 3: Changing situations

What remains unknown is the impact that this legislation will have on the financial state of young couples who go through bankruptcy, marital separation and divorce.

There’s a lot to consider – for first-time buyers, the market and the overall economy – when it comes to using superannuation to fund home deposits. It will be interesting to see how this topic continues to develop throughout the year.