Hockey’s super proposal would ‘promote a property bubble’
As criticism for Treasurer Joe Hockey’s proposal to open super to first home buyers mounts, one property analyst has warned the move would “artificially inflate” demand for property.
As reported last week, Mr Hockey said he is concerned about the difficult position faced by first home buyers and that Australians “need to have these conversations” about making super more flexible.
This has been met with strong disproval from the superannuation industry and recently communications minister Malcolm Turnbull labelled the proposal a “thoroughly bad idea”.
SQM Research managing director Louis Christopher believes Mr Hockey’s idea would “promote a property bubble” if ever adopted.
“The problem is that tinkering with the property market in this way would only serve to artificially inflate demand for property and therefore push up house prices even higher than they are now,” he said.
Mr Christopher said such a policy would “have a similar distortionary effect” to the first home owner grant, which he said caused prices to rise in excess of the handouts.
He also said that Mr Hockey’s super idea would be impractical for most first home buyers in their twenties and thirties.
“With Sydney vendors now asking for over $1 million for a house, a 10 per cent deposit on a Sydney home raised through super would erode almost entirely the retirement savings of most people in that age group,” he said.
Mr Christopher said the way to make housing more affordable is not to increase, but reduce government intervention – starting with negative gearing.
“Reducing negative gearing, a highly distortionary policy, would have a far more beneficial effect on promoting housing affordability,” he said.
“If negative gearing was repealed or altered, investors who are now gobbling up property would back off buying houses, which is what those who are demanding lower dwelling prices want to see.”