# Use your super to buy a home



## krisbarry (19 October 2005)

Use your super to buy a home

By SCOTT MURDOCH in Canberra and LOUISE TRECASSI
19oct05

PEOPLE may be allowed to dip into their superannuation savings to buy a home, under a proposal being considered by the Federal Government.

The move, proposed by the Real Estate Institute of Australia, has been promoted as one way to address the looming housing affordability crisis in the nation's capital cities. 

The proposal was made as part of a Government hearing to bolster the superannuation savings of younger people. It would allow people, aged under 40 to use their voluntary contributions as a housing deposit. 

The extra injection of funds could stimulate the national housing market, which has started to settle after years of boom times. 

Real Estate Institute of South Australia president Mark Sanderson welcomed any incentive to encourage people to enter the property market. 

"The issue of home affordability is still a challenge, so this idea is a good way to encourage home ownership for younger people," he said. 

The Government estimates people contributed an extra $5 billion of their own money to super savings in the past year. 

That figure has been steadily rising after the introduction of the co-contribution scheme in which people are paid $1.50 for every $1 they put in themselves. 

The national super savings pool now stands at $741 billion. 

The early access was proposed by the national real estate institute, but has been supportively discussed at recent meetings of the parliamentary economics committee. 

The plan has been condemned by Labor, which said it could allow tax rorting to seep into the super system. 

Opposition finance spokesman Lindsay Tanner said: "The whole point of retirement income is to have diversified portfolio of investments. 

"If you put one big slab into one asset then there's risk associated with that and it changes the profile of the overall assets that you're holding." 

Source: 
http://www.theadvertiser.news.com.au/common/story_page/0,5936,16965605%5E911,00.html


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## krisbarry (19 October 2005)

Any thoughts on the above article?


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## tech/a (19 October 2005)

I cant see how the funds can be released upon retirement.
You need a roof over your head and if all your super is in your dwelling how can it be released.
Worse still if they then wont allow the home to be used as collateral for further borrowings.

You can currently have property---un encumbered in your Super.
The whole Unencumbered thing is restrictive.In the US your home is a tax deduction.
If even a part of the increased collateral can be used that would be great.
We with self contibuting Super Funds have very limited options with our funds.We can buy a share portfolio which may or may not perform--we can buy un encumbered property---same thing.

Super Funds can loan out our $$s to finance property!--
If I have $100k in Super and borrow a further $200K from a Super fund lender(Like Interstar) whats the nett exposure difference?

In summary could be good if it can be designed to give people a financial leg up rather than tying up funds.
EDUCATION is the key (How to create wealth) and thats sadly lacking.


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## wayneL (19 October 2005)

krisbarry said:
			
		

> Any thoughts on the above article?




I see it as a panic move to prop up prices.

When prices are rising it's up to "market forces". When prices are falling suddenly goverment is in there medling with mechanisms to prop it up.

Ultimately, reality will prevail.


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## RodC (19 October 2005)

Just looks like another case of an industry group (Real Estate Institute) looking out for their own interests.

This would do nothing to help housing affordability, not that I consider there is a "crisis" anyway.

Rod.


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## krisbarry (19 October 2005)

I think the main point of the article is that extra payments added to super can be used...

*... promoted as one way to address the looming housing affordability crisis in the nation's capital cities. *

I actually think this is a great idea.  I have been adding extra payments to my super and I would be more than happy to use this extra savings to purchase a house.

Remember future generation will have most of their savings in super, unlike past generations.  We need to find ways to unlock this super and use it wisely for future investments.


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## RodC (19 October 2005)

Kris,

If you hadn't put those extra payments into a vehicle as over-regulated and unwieldy as super then you would be able to use those savings for a house.

Super isn't designed to be "unlocked" until you retire. If you think you'll need the money before then, then don't make extra payments.

Who says there is going to be a "looming housing crisis" anyway, this is just fear mongering.

Rod.


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## clowboy (19 October 2005)

Super is the most fantastic invesment there is.

Even if you only put your money on term deposit at a rate that matches inflation you still make 15% on your money (with very minimal risk). (of cousre this is assuming you are on 30% tax rate, most are (at least)).

Not to mention the $1.50 : $1 co contribution.  If you put 10k in and recieved 1k from government you would earn an additional 10% on your dollars (a one off return).

These kind of returns are really quite unheard of for the risk that is taken.

The downside, you cant have it back until you are 65....70.......

I may well be DEAD by then and that is one RISK I dont want to take.

Just my two bob


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## Mofra (19 October 2005)

tech/a said:
			
		

> I cant see how the funds can be released upon retirement.
> You need a roof over your head and if all your super is in your dwelling how can it be released.
> Worse still if they then wont allow the home to be used as collateral for further borrowings.



tech,  
Most lenders are introducing products known in the industry as "reverse mortgages" whereby 30% of the value of the property can be released as cash equity with the balance owing payable from the will of the owners.
It is becoming surprisingly common and quite a number of people may get a shock when it comes time to "collect" on the will of their parents.

The only real stipulations are a valuation must be performed, the interest rate is roughly ~1% higher and at least one applicant must be past retirement age.

Of course when the oldies exhaust all thier funds, they can only hope that house prices have continued to rise so they can borrow more equity.


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## krisbarry (19 October 2005)

RodC said:
			
		

> Kris,
> 
> If you hadn't put those extra payments into a vehicle as over-regulated and unwieldy as super then you would be able to use those savings for a house.
> 
> ...




I am making extra payments so I can get and extra $1,500 free per year via the super co-contribution.  Seems logical to me of a 150% return!  Cannot get that kinda return anywhere else.

I think you will find that in the future, up-coming generations will be able to access super to buy a house. I don't think there is anything wrong with that.  As current retirees are cashing in their super funds to pay off the rest of their morgages.

Their is a looming housing crisis for up coming generations as previously discussed on other threads.  Wages have not kept up with the house prices! (particularly in the past 4-5 years)

Don't know about you, but I am very concerned for the 18-35 age group.  Home ownership for this group is at its lowest level in the history of the housing market.  Maybe its just a sign of the times, or a crisis in the making!


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## tech/a (19 October 2005)

Mofra said:
			
		

> tech,
> Most lenders are introducing products known in the industry as "reverse mortgages" whereby 30% of the value of the property can be released as cash equity with the balance owing payable from the will of the owners.
> It is becoming surprisingly common and quite a number of people may get a shock when it comes time to "collect" on the will of their parents.
> 
> ...




Great topic need more time than I have to reply gotta do some work.

But will get back to it.
Moff thought I had seen something like that.

Move in the right direction.


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## RodC (19 October 2005)

krisbarry said:
			
		

> I am making extra payments so I can get and extra $1,500 free per year via the super co-contribution.  Seems logical to me of a 150% return!  Cannot get that kinda return anywhere else.
> 
> I think you will find that in the future, up-coming generations will be able to access super to buy a house. I don't think there is anything wrong with that.  As current retirees are cashing in their super funds to pay off the rest of their morgages.
> 
> ...




Kris,

Yes, it's logical to take 150% return if you get it, but you need to accept that once you do that the funds are tied up until retirement.

You've expressed concerns about artificially high housing prices, what do you think putting more money into the property market (from super) would do to house prices - they certainly wouldn't go down.

Yes, wages haven't keep up with house prices over the last few years, this is normal market behaviour. Given time the situation will probably correct itself, this does not make a crisis.

I'm no more concerned about the 18-35 group than any other group, I don't think it's really any tougher than it's ever been for those willing to put the effort in. One of the things I do see is that many aren't willing to start modestly and work up, many seem to "need" the brand new "mansion" with all the trimmings and 2 new cars in the driveway. Not much compromise.

Rod.


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## Milk Man (19 October 2005)

krisbarry said:
			
		

> I am making extra payments so I can get and extra $1,500 free per year via the super co-contribution. Seems logical to me of a 150% return! *Cannot get that kinda return anywhere else.*




Can get double if youre allowed to use the best tools. I do not have 1c in super and I never intend to. You all can carry on with tax breaks this and tax breaks that.... but 1: You cant get it till your that old all you want to buy is prunes and a flash new walking stick and 2: You cant use the big bad CFDs or FOREX (can you?) coz they might eat all your money.


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## Smurf1976 (19 October 2005)

IMo it's just another way to try and prop up a deflating bubble.

Markets revert to the mean. Always have and probably always will. With housing so highly valued the real estate industry might as well face reality that the party's over and valuations are coming back down. 

Houses are worth what people will pay for them. If people have more money then, since most first home buyers ask only "how much can I borrow" and spend the lot, prices will simply move up if they have access to super as well.

A far more sensible means to improve affordability would be to just stand back and watch the market correct itself. That, of course, doesn't suit the real estate industry...


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## bvbfan (19 October 2005)

In my opinion this will only drive prices up to more unstable levels, much like the first home buyers grant but on a greater scale.


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## krisbarry (19 October 2005)

Milk Man said:
			
		

> Can get double if youre allowed to use the best tools. I do not have 1c in super and I never intend to. You all can carry on with tax breaks this and tax breaks that.... but 1: You cant get it till your that old all you want to buy is prunes and a flash new walking stick and 2: You cant use the big bad CFDs or FOREX (can you?) coz they might eat all your money.




I think it is a smart move for me,  this is just one step I have put in place for me to eliminate paying tax, except for the hidden taxes.  I guess its up to the indivdual to where they place their super or nest egg.

Some have it in assests, others housing, others the stock market, others in super.  Whatever works for you!

I don't see too many 65+ age brackets eating prunes and using walking sticks, we are living far longer/healthier lives.  Pretty soon 65 years of age will be half the average life span.


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