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.

Pros: How Access to Super Can Help First Home Buyers 

1: Faster access to the property market

With rising property prices and tightening loan-to-valuation ratios, home ownership  is increasingly out of reach for many young buyers. The seek  First Home Super Saver (FHSS) scheme seeks to radically change all that.

2: Regulating housing affordability

The former senator also pointed to the  Home Buyer’s plan, a similar scheme now operating in Canada which allows up to $60,000 (as of 2024) of retirement savings to be accessed by first time home buyers. Xenophon said that this model had improved  housing affordability in Canada and he was seeking to propose the same thing that spring in federal parliament.

Cons: Risks of Using Super for First Home Buyers

1: Retiring on a shoestring budget

A foreseeable concern with the FHSS scheme is the longer term impact of withdrawing your super early to purchase a home. Without additional savings measures,many first-home buyers may be potentially disadvantaged at retirement time. According to many, including the Association of Superannuation Funds of Australia, there is a likelihood that this scheme may lead to many people being unable to fund the lifestyle they wish to live in their retirement years.

2: Higher super contribution rates

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

First home buyers who withdraw from their superannuation now may need to increase their super contribution rates to reach their retirement goals. This means that salaries and wages could potentially be swallowed up and locked into superannuation, reducing take home pay. 

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.