An Illawarra academic believes the federal government’s salary sacrificing into superannuation scheme for first home buyers will “probably just aggravate the price problem with housing”.
Among the measures outlined by Federal Treasurer Scott Morrison last week was first home buyers being able to voluntarily contribute up to $15,000 per year ($30,000 total) to their superannuation to be set aside for a house deposit.
The First Home Super Saver Scheme will allow entry-level buyers to save funds at a discounted tax rate by making extra contributions to their superannuation.
Alex Frino, Professor of Economics at the University of Wollongong estimated of Illawarra residents aged between 30 and 40, 35,000 could be first home buyers.
“The average age of the first home buyer is 32 – that’s Australia wide,” he said.
He believed the initiative was an attractive scheme for first home buyers as it offered a significant tax benefit.
However, he described the salary sacrificing into superannuation as a “poor measure” and “problematic”.
Prof Frino didn’t believe “helping people to acquire more money, more cheaply to buy housing” was going to be an overall solution.
“It doesn’t attack the supply problem, and it’ll probably just aggravate the price problem with housing,” he said. “All this is going to do is allow first home buyers a tax effective way of raising a deposit.
“So there’s going to be more money around chasing the existing housing stock, and that’s just going to push up prices further.
“It’s going to do nothing to address the fundamental problem, which is actually a shortage of housing quality.”
Prof Frino said the savings initiative being costed at $250 million nationally indicated that “it’s not a big measure”. “That implicitly reflects their beliefs about how many people will take this on,” he said. “If the benefit for a couple is say, about $12,000… they’re only believing about 20,000 nationwide.
“We’re then talking about an estimated 300 couples in the Illawarra taking this on, given the numbers the government’s projecting.”
Meanwhile, in an attempt to encourage elderly Australians to downsize, elderly Australians (65-plus) will be able to contribute up to $300,000 from house sale proceeds to their super at the non-concessional rate from July 1, 2018.
Prof Frino said this would be effective, adding high-quality housing stock to the marketplace.