Should super be used to enter the property market?

Stephanie Brennan | May 01, 2017

As a millennial who has built wealth through investing in property I don't believe first home buyers should be able to access their super early to fund the deposit to purchase a property. 

I say this for many reasons, firstly super was introduced in Australia in the 1800s as an employee benefit scheme that was later revised to help the government cope with the ageing demographic which also saw the introduction of the Old Age Pension Act. Super enables people that have an inability to or are unable to save the financial support they need during their retirement. By releasing super to fund the deposit of a first home means that the very reason super was created is being diluted.

If a first home buyer wants to utilise their super to invest in property then they should do so by setting up a Self Managed Superannuation Fund (SMSF) so their retirement is financially protected. 

Should they wish to purchase a property outside of super, there are plenty of strategies to enable them to do so. My concern is that there are two main reasons why first home owners cannot afford to purchase a property and fund the deposit and that comes down to lack of advice available in the market place and also a lack of discipline by first home buyers as they cannot delay gratification and therefore have an inability to save. 

Now if they were to release their super, the majority of people that are first home buyers won't have enough to cover the deposit or the stamp duty and legal costs associated with purchasing. If the government really wanted to help first home buyers they would remove stamp duty and only charge land tax for investors that had multiple properties, as stamp duty concessions are pointless and often you have to spend a significantly greater amount of money to gain a very minimal rebate. I also firmly believe the government should be integrating into the education system knowledge around investing and budgeting, which is the first step to creating wealth, to help assist both current and future generations of first home buyers. 

If a first home buyer were to purchase property within 20km's of Sydney CBD for under $700K for a one bedder, they would need approximately $35K for a 5% deposit and $26K stamp duty, $2K legals totalling $63K. I question how many first home buyers would have this amount in their superfund to begin with. These figures are much more achievable if the government where to remove stamp duty. 

I believe that until the government does take a serious look at removing stamp duty then first home buyers also need to review their expectations and be realistic about what they can financially afford to buy as opposed to what they want to buy. They could also look at interstate or international options to increase their savings more rapidly to be able to invest back into the Sydney market and then in a couple of years into the home they really want. 

Accessing their super won't remove the problem, it is an ineffective bandaid solution at best.