First home buyers will be able to use their superannuation to buy property under a new law being proposed by Senator Nick Xenophon.
The independent senator for South Australia said he would introduce legislative changes to allow new buyers to ‘borrow’ money from their super account to help pay their deposit.
Senator Xenophon said the scheme would be similar to one in Canada, which allows borrowers to take up to $25,000 from their superannuation and repay it over 15 years.
“With more and more Australians finding it difficult to break into home ownership, adopting the Canadian scheme would make a difference to many thousands of Australians each year,” he said.
Sydney Mortgage Practice managing director John Kinross said Senator Xenophon’s idea sounded good in principle.
“I think a lot of first home buyers find it difficult to save the amount of money they need to get a deposit and pay for stamp duty,” he told The Adviser.
“It depends on which market you invest in, but in principle paying back $25,000 over 15 years isn’t a massive ask.”
Money It Is director Cheryl Green said although she supported first home owner grants, she felt the superannuation idea was taking government assistance too far.
“I feel on one side this super idea is good, but how much help do we have to give first home buyers to get into their first home?” she said.
“If you allow the younger people to access their super, then what happens if a separation takes place? It feels like you’re opening up a can of worms.”
Finsec Partners lending manager Brenton Moyle said the superannuation idea should actually be extended so that new borrowers could draw on enough funds to pay 20 per cent of their deposit, up to a maximum of $100,000.
“The 20 per cent equity is quarantined in the property and, when sold, 20 per cent of the sale proceeds are deposited back into the client's super fund,” he said.
“With property values assumed to grow over time, this would see more than $100,000 deposited back into super.
“In effect, the super fund would be investing in the property. Is this idea too radical for our legislators to get their heads around?”
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