Unpopular Opinion: Accessing Your Super to Buy Your First Home

There's been a lot of buzz around the new scheme that allows first-time home buyers to withdraw up to 40% of their superannuation, capped at $50,000, to use as a deposit. When I first heard about this, I was taken aback and thought it sounded like a risky and ill-advised idea. However, after giving it some thought, I can see the potential benefits.

I understand that this approach could backfire for some people – but then again, buying property without this scheme also carries its own set of risks.

A Potential Game-Changer for Rent-Trapped Buyers

One scenario where this scheme could be advantageous is for first-time buyers who have been paying rent for years and have struggled to save up a deposit. If the difference between their rent and a potential mortgage payment is relatively small, why should they continue pouring money into an investor's pocket when they could be building equity in their own home? By getting into the property market sooner, they could potentially pay off their mortgage faster than the $50,000 they withdrew from their super – money that would have otherwise gone towards rent.

Long-Term Gains: Property vs. Super

Another way to look at it is to consider which investment would yield better long-term returns: your property or your superannuation. Property can be highly leveraged, with borrowing typically up to 90% of the value. This means any return on investment is magnified tenfold, potentially leading to much larger profits for the buyer.

Addressing the Risks

Of course, there are risks to consider. If the property's value declines, as long as the buyer continues making their mortgage payments, they're not in a worse position unless they need to sell urgently. The key risk lies in situations where an urgent sale is required, such as relationship breakdowns or job losses. Due to the high entry and exit costs associated with the property, this is where buyers could potentially lose out. However, this risk exists regardless of whether they used the first home buyer scheme or not – the only difference is that their super balance would be $50,000 lower.

Most first-time buyers are likely to be under 45 years old. If they did lose the $50,000 from their super due to a poor property purchase, they should have enough time to financially recover. In my experience, the lack of accessible savings is often the root cause of financial stress for clients – withdrawing some super doesn't affect this.

A Potential Boost for Regional Economies

This scheme could also incentivise younger generations to move to major regional centres, helping to grow those economies as they can enter the property market sooner and get more value for their money.

While I'm not saying this is a perfect scheme – there are inherent risks, and careful rules and criteria must be established – I believe it has merit, especially if the property market continues to grow.

I'm keen to hear your thoughts on this controversial topic.

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