Using super to buy property

[JDP1]

Just read that the feds are thinking of allowing ( I think anyone?) to use their super to finance a property purchase.
In the past this could only be done for those with SMSF?

Now, in order to assist FHB segment and maybe others get into the market, an idea has surfaced to let them use their super to break into the market.

Just talk at this point, no decisions made yet.

Is this a good idea? I would have thought not. Allowing FHBs to deplete their super to get into the market will serve to only increase house prices, thereby making it tougher for other FHBs with not much super to get in.
Also, the real danger is that once super (largely protected asset) is depleted into property ( largely unprotected), that money can be gotten out and used for pretty much anything. e.g. If I use 50k from my super to finance a house purchase, I can then withdraw equity (assume 50k or whatever the bank will lend me) on my house and use it for whatever I wish (vacation, blackjack tables etc). This is then like taking money from super directly to finance other means. Surely, that's dangerous.
It could work provided that the money is used wisely, and equity is used only for wise purposes ( like securing other investments) but that is not always the case and can spell real danger if not careful- I think it takes an educated investor for this and a lot of FHB;s are just not ( no offense to any FHBs...)

 

[Terry_w]

Terrible idea because people will blow their money. Perhaps buy a property with it, but later sell the property and spend/lose the money and be left with nothing for retirement.

No one could ever access their super for property purchase, until reaching retirement age (or condition of release). You may be confusing a SMSF borrowing to buy property.

 

[JDP1]

Terrible idea because people will blow their money. Perhaps buy a property with it, but later sell the property and spend/lose the money and be left with nothing for retirement.

No one could ever access their super for property purchase, until reaching retirement age (or condition of release). You may be confusing a SMSF borrowing to buy property.

Yeah, I probably am...

I agree bad idea and a potentially very dangerous one. Ive seen people at retirement age with no property nor much super and ...well...lots of sleepless nights for them worrying.

 

[datto]

Good idea....YES, more buyers on the market!

Good for brokers, agents, state govt, conveyancers and solicitors, builders etc and yeah property investors.

 

[Hoffy]

Terrible idea. Will never happen. Embarrassing for Hockey.

 

[sanj]

Terrible idea because people will blow their money. Perhaps buy a property with it, but later sell the property and spend/lose the money and be left with nothing for retirement.

No one could ever access their super for property purchase, until reaching retirement age (or condition of release). You may be confusing a SMSF borrowing to buy property.

My initial reaction is that it's a bad idea but there could be measures in place to ensure what you're describing doesn't happen. For example thr govt could have some sort of caveat against the property where if anything g additional al is borrowed against the property it is only after the initial amount from super is returned. I believe singapore has a similar system

 

[LibGS]

Pushing more money into a supply constrained market can only push prices up. Basic economic theory.

 

[datto]

Hockey's idea? God bless him. I'll shake his hand when he next walks out of the court house. Is it Central Local?

 

[kamchatsky]

Hockey's idea? God bless him. I'll shake his hand when he next walks out of the court house. Is it Central Local?

Nope. Bogan Shire Council

http://www.bogan.nsw.gov.au/

Either he is nuts or he thinks the voters are nuts with such ideas.

 

[datto]

^^^^^magical place!

 

[Terry_w]

Hockey's idea? God bless him. I'll shake his hand when he next walks out of the court house. Is it Central Local?

Thats the criminal courts! Supreme Court in Macquarie st.

 

[Cassandra]

Worked in Singapore, NZ and Canada.

 

[perthguy]

Worked in Singapore, NZ and Canada.

Yeah, but it could never work here. We are a nation of NO!

 

[vaughan]

Yeah, but it could never work here. We are a nation of NO!

We are a nation of negative gearing.

 

[neK]

There was an article about how its a just a con. I can't find the article, but to sum it up - how does it help if every other First Home Buyer can dip into their super?

All it does it drive up the prices again.

"When everyone is super, no one will be....."

 

[Terry_w]

great picture!

 

[perthguy]

We are a nation of negative gearing.

Zing!

I don't know why everyone is jumping in to defend super. Apparently it's nothing more than a money laundering scheme

He said the worst part of the scheme was that any income from superannuation was entirely tax-free if you were over 65.

?If people understood this there would be riots,? Dr Denniss said. ?It?s legal money-laundering.

?If you can sink $100 million into your super fund and you are over 65, you will never pay tax. It?s obscene.

http://www.news.com.au/finance/supe...system-is-broken/story-e6frfmdi-1227258188475

Do you think we are able to have a mature discussion about this? I have seen anything balanced in the media. Just partisan bashing of the opposite side.

 

[perthguy]

Does anyone know if a retiree owning thier own home is better off than a retiree that rents? It would be interesting too see a non-partisan cost benefit analysis comparison. I would have thought a home owner would be better off but I'm probably wrong.

 

[rizzle]

Isn't it the same old issue we had with the FHOGs? That is; it only serves to line the pockets of second home buyers selling their first home, because all FHB's now have increasing buying capacity, so relatively speaking the houses they are buying will cost them more (ceteris paribus).

 

[perthguy]

A Canadian commentator calls for winding down of the Home Buyers? Plan which allows first homebuyers to access retirement savings as a deposit (but they have to pay it back). According to the article, the number of people accessing the scheme is quite modest, at 106,281 in 2011. I'm not sure if ~100,000 additional purchases in Australia is enough to distort the market and drive up prices? How does that number compare to the number of residential properties purchased by SMSFs?

I think an important aspect of the Canadian scheme is that the money has to be paid back into the super fund. This is something that has not been discussed in relation to the Australian idea. The other interesting aspect of the article is that there is an alternative in Canada - a Tax-Free Savings Account where the account-holder can contribute up to $5,500 a year and income earned on contributions is not taxed. I guess something like that for first home buyers could be considered in Australia. The government could make contributions to a TFSA tax deductible (with contribution caps and means testing?). I guess it's possible.

http://www.theglobeandmail.com/glob...ers-plan-should-be-wound-down/article8211010/

http://www.theglobeandmail.com/glob...ave-for-a-house-rrsps-or-tfsas/article625924/