First-time home buyers expecting to use superannuation savings as a deposit for a property in either Sydney or Melbourne may find both cities way too pricey and would be still locked out from the housing market, CoreLogic research analyst Cameron Kusher has said.
Broadcaster ABC recently crunched the numbers and showed that based on the average earnings for a 25 to 34-year-old, including their 9.5 percent super and a $7,125 per annum co-contribution, and assuming returns of 3.2 percent per annum, the average person in this age group could save $45,545 in their super.
“Money accumulated in funds is relatively immature and unlikely to sufficiently boost buying power to enter the market,” Kusher said.
“For argument’s sake, let’s say they could have a deposit of $50,000 which means if the buyer put down a 10 percent deposit, they could purchase a property worth up to $500,000. Keep in mind that they would still have to pay lender’s mortgage insurance (LMI) if they were borrowing more than 80 percent of the value of the property.”
“Ultimately, a purchase price of $500,000 is not going to allow the potential buyer to access very many detached homes in Sydney and Melbourne, particularly if they want to live closer to the city.”
Outside of Sydney and Melbourne, CoreLogic research confirms that there are far greater options for potential first home buyers with a purchase price of $500,000.
“Keep in mind when we talk about the national housing affordability challenges, it is largely a Sydney and Melbourne problem.”
“Both the ABC data and our research highlights that access to superannuation to purchase a home would mainly help buyers outside of Sydney and Melbourne. With both cities being the housing markets most stretched for affordability, allowing first-time buyers to access their super for a deposit is going to make little difference in affording these consumers with access to the housing market,” he said.
“Furthermore, accessing superannuation has the potential to add to housing demand which is already outstripping supply and potentially lead to even greater increases in values not only in Sydney and Melbourne but possibly elsewhere as well,” he added.
At present here is what your super money (or your clients) will get you:
Sydney: Only 4.1 percent of all the suburbs in the city have a current median house value of $500,000 or less, and 19.7 percent of suburbs have a median unit value of $500,000 or less. Gosford, Wyong and Blacktown are the dominant council areas for the locations of this house. For units, potential buyers can make it closer to the inner city; however, the closest area will be the council areas of Auburn and Parramatta council areas.
Melbourne: With a budget up to $500,000 potential purchasers in Melbourne will have access to 18.7 percent of suburbs for houses and 50.1 percent of suburbs for units. For a house, the closest you will find to the city centre in Melbourne is within the Hume council area close to the airport. For a unit there are far more options and this budget would get you as close as central Melbourne with units in Melbourne, Kensington and Carlton having a median value of less than $500,000.
Canberra and Darwin: Residents of Canberra (7.1 percent) and Darwin (7.5 percent) also has little access to houses throughout the city with a budget of $500,000. At the same time, a majority of suburbs have a median unit value of $500,000 or less in Canberra (83.2 percent) and Darwin (90.6 percent).
Brisbane, Adelaide, Perth & Hobart: Residents of Brisbane (39.6 percent), Adelaide (47.9 percent), Perth (37.8 percent) and Hobart (76.6 percent) have much greater access to houses worth $500,000 or less. In each of these cities, a budget of $500,000 would allow buyers to purchase a unit in at least three-quarters of all the suburbs of the city.