Super home withdrawals common overseas

Allowing citizens to dip into their retirement accounts to help them afford their first home is common practice overseas, but experts say it’s hard to know the extent to which they’ve jacked up house prices.

The Morrison government’s election-eve proposal to allow Aussies to withdraw a portion of their super for a first home deposit has prompted fierce debate, with the superannuation industry and some housing advocates claiming it would raise house prices.

Across the ditch, Kiwis have been able to dip into their Kiwisaver retirement accounts for a first home deposit since the individual retirement account program began in 2007.

New Zealanders can withdraw nearly everything from those accounts, leaving as little as NZ$1,000 in them. For people earning less than a certain amount, the NZ government chips in a few thousand dollars – up to a maximum of NZ$20,000 for a couple buying a brand new house or building their own.

“KiwiSaver withdrawals are certainly common here, and an accepted option to help people access the market,” said Kelvin Davidson, the chief property economist with CoreLogic New Zealand.

In the 12 months to 31 March 2021, New Zealanders withdrew a total of NZ$1.4 billion from Kiwisaver accounts for first-time house deposits. The scheme had $81.6 billion in assets at year-end.

“In terms of the influence on house prices, unfortunately it’s very hard to be sure – at the margins, it has probably boosted them, as it’s allowed more buyers into the market who otherwise may not have been able to make a purchase,” Mr Davidson told AAP in an email.

But the effects of the withdrawal scheme are different from basic government subsidies for first-time homebuyers, he added.

“In that case, sellers know what the subsidy is, and tend to just raise the asking price by the same amount. But that doesn’t apply for KiwiSaver withdrawals, as it’s private knowledge,” he said.

In Canada, citizens can borrow up to C$35,000 (A$38,000) from their Registered Retirement Savings Plan for a first-time home deposit. But the withdrawal must be repaid within 15 years, and is only available to Canucks making less than C$120,000 (A$133,000).

Americans can withdraw up to US$10,000 ($14,000) from their Individual Retirement Accounts for a first-time house deposit.

In the UK, Theresa May’s government in 2017 introduced a scheme for adults under 40 known as Lifetime Individual Savings Accounts, also known as “Lisa”. They are explicitly designed for saving for both retirement and house deposits. Contributions are voluntary but investment growth is tax-free.

The Morrison government’s Super Home Buyer Scheme, unveiled over the weekend, would allow first homebuyers to withdraw up to 40 per cent of their superannuation, to a maximum of $50,000, for the purchase of a first home.

Ray White chief economist Nerida Conisbee says that both the Coalition plan and the Labor Party’s “shared-equity” scheme, in which the government would essentially buy a portion of the property with the homeowner, would result in house prices rising.

 

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