Given the reported idea of using super to assist home buyers is back, again, data from our core market model offers some important insights into the potential number of households who may benefit. So here is our analysis.
First we look at the average super balances households have by age groups. No surprise, younger households have lower balances because they have not been saving so long, and not benefitted from compounding. In addition, we see that households who “want to buy” a property tend to have a lower value in super than those in the general population.
Next we look at the number of households in each age band, who are “want to buys”, and the number who have a minimum balance of $25k and $50k in super – this is important because most prospective purchasers will need a deposit of at least $50k.
From this we estimate that from the pool of want to buys aged 20-35 of 315,000 about 77,000 would be potentially able to benefit from accessing super for property purchase, or about 24%. So it may make a small dent in the number trying to get into the market, but overall it is a small proportion of the 616,000 “want to buys” we identify across the market.
In addition of course there is the argument that this will simply lift prices in this sector of the market, as a zero sum game, as well as the point that risks in housing are higher (especially at current high prices) and reduced super contributions especially in the early years means compounding is reduced so in later life balances will be lower.
Unfortunately practical real world experience proves beyond doubt this is not only inaccurate but misleading. As the majority of people, baby boomers, are finding 30 years + of making contributions means you might be able to either do some renovations to your home or make a bulk reduction to your home loan.
It is only in the last year that the superannuation industry, well not all of it, have a legal obligation to do “the right thing” by their customers after years of fee gouging.
In addition the consequence of stock and property market crashes is totally ignored, with the looming real estate coming I do not thing it would be unreasonable to see super fund balances drop by over 30% in line with the real state and then linked stock market crash.
Your home’s value might drop but your still able to live in it and your mortgage payment might change but not, as I have seen several times in the past – happy retirement your broke.