Speaking to SMSF Adviser, Wealth Within chief analyst Dale Gillham said allowing people to purchase their first house with their superannuation savings will not be helpful in funding their retirement.
“People just borrow up to their limits, use their house to borrow even more and waste their money,” said Mr Gillham.
“Therefore we need to keep as much money in their super as possible, letting it compound and build up.”
Mr Gillham said superannuation money should stay as an investment for the future, as the family home is not about retirement.
“You’re not going to think about the family home from an investment point of view – buying a family home has nothing to do with retirement, it’s a lifestyle choice,” he said.
“To me, [this proposal] is a double-edged sword; the government plays with superannuation all the time resulting in never ending changes.”
Mr Gilham said while he understands the government wants to help younger people get into property, “Australians need to get smarter”.
“Australia’s love affair with property is very misguided. It’s actually far more profitable just to be a renter and invest in shares and property [you don’t live in] because of the tax deductions and the fact it’s a much better way to create wealth for retirement,” he said.
Having your own property with your name on the title, Mr Gillham said, is something Australians should get out of the habit of.
“It’s not actually very productive for you because all you’ve done once you sell the house at the end of a 30-year period is pay the capital cost into the house and the bank interest – it’s just enforced slavery.”
I want to congratulate Mr Hockey to bring this topic in the open. It is important that youg people are able to get in the property market and continue to fuel demand up.
My father was able to purchase from a withdrawal from his super a lot in 1970 when he was 35 years old and that house is still his family home. That withdrawal was in today’s dollars only $1200 but a huge amount for him at that time. Rent of that property today is $4,000 per month and at age 80 could never dream to afford it. The property sells for Aus $2Million. Had he continued to rent and invested in shares etc, I am not sure, it would have given him the same result.
Maybe Section 65 should only be amended, that is an unsecured loan to a under 35 year old member allowed for 25 years to purchase first home from only a public offer fund, where repayments can be regulated. This loan can be then used as a deposit for a first home, instead of withdrawing from super.
I agree with Mr Gillham’s comments and it would be great to have more analysis of scenarios that demonstrate the disadvantages and advantages of property. Furthermore, budgeting and saving for a house should continue to be the norm.