There’s been some media play about how unaffordable housing is, especially in Sydney and Melbourne.
Generally, I couldn’t agree more… but that doesn’t mean that there are no affordable properties out there either…
Thirty seconds on realestate.com reveals some 1 and 2 bedroom units in Sydney for just over $200k… that feels very affordable to me.
Or is it that our expectations are all out of whack???
The latest angle playing all through the media is allowing First Home Buyers to access up to $25,000 of their super to use as a deposit to put towards their first home.
So what spurred all this on?
Grandstander, Nick Xenaphon (his website proves he’s one) comes out and suggests we allow First Home Owners to access up to $25,000 of their superannuation to be used as a deposit to put towards their first home. This is purely uneducated and completely ridiculous.
Nick Xenaphon is a senator from South Australia… isn’t SA one of the cheapest housing states in the country?
So wHy all the barking???
Grandstanding, that’s wHy!!!
So again, I do a 30 second search & find a 2 bed unit in the Elizabeth area for $130,000… yes that’s right the first number is a one!
My first property I purchased was my home, a 1 bedroom unit on Cronulla in 1994 for $112,000. So 20 years later, you can buy a unit in Adelaide for $130,000, that’s only $18,000 more.
Sure, the Adelaide unit is not in the most desirable area and isn’t a mega mansion, but neither was my damp ridden unit in Cronulla.
His argument is that our housing market is unaffordable. And that Canada introduced a similar scheme (there’s that word again), so Australia should follow.
And just because Canada does it, why does that mean it is OK for us to do it… the effects of this “scheme” are not felt for 30 years down the track when these same people retire and have a dramatically reduced superannuation fund.
So why don’t we watch what happens to Canada and then, and if successful, we can implement? Just a thought!!!
But why is it so stupid an idea?…
Superannuation was designed as a compulsory savings plan for every working person in Australia to put aside some of their hard earned income into a separate account that can’t be touched until retirement at 60+ years of age. By then you were suppose to have enough in there to be able to sustain your own lifestyle in retirement and not have to rely on the government pension.
Fairly relevant one would think!!!
But accessing the first $25,000 in a persons superannuation account can have catastrophic results 30-40 years later. Compound interest is what allows our Superannuation to grow, upon grow, upon grow.
It takes a person to get to the age of 25 years before they reach this first $25,000 in their superannuation, as long as they start working at 18 or 19 years of age. Put a University degree in there, and it can be until they are 30 years old.
The first $25,000 for any working person is the most crucial part of the retirement fund. It’s the hardest portion in their retirement fund to earn because they are young and not earning as much. With a small base, even a good percentage increase in the fund acquaints to low dollars, due to the low starting base and high dollar fees associated.
Now the pension is not going to be around for ever… it’s a mathematical impossibility… you can’t have an ever increasing ageing population, with increased living expenses supported by a decreasing working population paying taxes.
There is simply not enough money to go around…
This is why the SG Contributions by employers has increased from 9% to 9.25% to now 9.5%… to help delay this inevitable decision… the cancellation of the Pension altogether.
I for one won’t be relying on the pension being around when I am ready to retire…
It will be long gone by then…
So, allowing First Home Owners to access the most crucial part of their super is simply a band-aid solution for now, with catastrophic results 30 years down the track…
But hey, Nick won’t be in Australian politics by then, so what’s he care…
Oh Yeh, doesn’t he get a guaranteed superannuation for life, paid for by us when he leaves politics???
But let’s number this up… single person earning $50,000 per annum plus their 9.5% super contributions. They start work at 19 and work til they are 60. Normally they would have around $320k by 60 years of age… even this isn’t enough to retire on in today’s costs of living. But if we take out the first $25,000, this means that your actual superannuation fund won’t commence until you are 25 years old.
Therefore, decreasing your time to accumulate your retirement by 6 years of your working life.
But the effect it has on the end result is huge… actually it’s 3 times as big and you would end up with only around $250k.
But let’s add to that a University Degree and a Gap Year, this further decreases the time by another 5 years, resulting in a superannuation fund in the low $200’s.
So like usual, what’s a problem without a solution…
Strap in, this one might bite…
How about you save the deposit?
Yep, that’s what I said…
We live in a world where we must have everything now… gratification must be instantaneous or we go cold.
We must have:
…and yes the list could go on forever.
Yet, we cry poor when it comes to being able to save. Now I am generalizing here as we have some clients who are fantastic savers but they truly are the 1%er’s.
But how about this… buy the type of home in an area where you can afford to live.
Remember that unit in Adelaide, the deposit required for this would be around $14,000.
Now that means for most of you that no you don’t get to live in the lavish suburb you may have been raised in. Or maybe you can’t buy the house you want but may need to buy a rundown one bedroom unit.
We all had to start somewhere…
And if rent is too high for you to be able to save the deposit, then look at share accommodation where rooms cost much less.
Where there is a will, there is a way…
What about trying to invest in property first, allow the property to increase in value then sell in years to come for a profit… increasing your deposit for your home?
Or look to buy your first home with a friend, going halves… there are always options.
But the idea of tapping into your Superannuation is completely ridiculous and will bite those people in the bum later in life, but I guess those same people will put their hand out again at 60 years of age wanting help then too…