It’s common abroad for citizens to dive into their retirement accounts to help them pay for their first home, but experts say it’s hard to know how much they’ve pushed home prices.
The proposal on the eve of the Morrison government’s election to allow Aussies to withdraw some of their superiors for a first housing deposit has sparked heated debate, with the pension industry and some housing proponents arguing that it would raise house prices.
On the other side of the ditch, Kiwis have been able to dive into their Kiwisaver retirement accounts for a first home deposit since the individual retirement account program began in 2007.
New Zealanders can withdraw almost anything from those accounts, leaving only NZ$1,000. For people earning less than a certain amount, the New Zealand government will fund a few thousand dollars – up to a maximum of NZ$20,000 for a couple buying a brand new home or building their own.
“KiwiSaver withdrawals are certainly common here, and an accepted option for helping people access the market,” said Kelvin Davidson, chief real estate economist at CoreLogic New Zealand.
In the 12 months to March 31, 2021, New Zealanders withdrew a total of NZ$1.4 billion from Kiwisaver accounts for first-time home deposits. The settlement had $81.6 billion in assets at year-end.
“Unfortunately, in terms of the impact on house prices, it’s very hard to be sure – in the margins, it probably gave them a boost as it allowed more buyers into the market who might not otherwise have been able to get a purchase,” Mr. Davidson told AAP in an email.
But the effects of the Withdrawal Scheme are different from the government’s basic subsidies for first-time home buyers, he added.
“In that case, sellers know the subsidy and tend to raise the asking price by the same amount. But that’s not true of including KiwiSaver because it’s secret knowledge,” he said.
In Canada, citizens can borrow up to C$35,000 (A$38,000) from their registered retirement savings plan for an initial deposit on their home. But the withdrawal must be repaid within 15 years and is only available to Canucks earning less than C$120,000 (A$133,000).
Americans can withdraw up to US$10,000 ($14,000) from their retirement accounts for a first home deposit.
In the UK, in 2017, Theresa May’s government introduced a scheme for adults under 40 years of age known as Lifetime Individual Savings Accounts, also known as “Lisa”. They are explicitly designed to save for both retirement and home deposits. Contributions are voluntary, but investment growth is tax-free.
The Morrison government’s Super Home Buyer Scheme, unveiled this weekend, would allow first-time homebuyers to take up to 40 percent of their pension, up to a maximum of $50,000, toward purchasing a first home.
Ray White, chief economist Nerida Conisbee, says both the coalition’s plan and the Labor Party’s “shared equity” scheme, under which the government would essentially buy some of the property with the homeowner, would result in rising house prices.
