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 to pricey.
Money accumulated in funds is relatively immature and unlikely to sufficiently boost buying power in order to enter into the market.
Last week the ABC crunched some numbers for purchasing using Superannuation.
They developed figures which showed that based on the average earnings for a 25 to 34 year old, including their 9.5% super and a $7,125 per annum co-contribution, and assuming returns of 3.2% per annum, the average person in this age group could save $45,545 in their Super.
For arguments sake, let’s say they could have a deposit of $50,000 which means if the buyer put down a 10% deposit, they could possibly 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% 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 confirmed 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.
What your super money will get you: Sydney: Only 4.1% of all the suburbs in the city have a current median house value of $500,000 or less and 19.7% 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% of suburbs for houses and 50.1% of suburbs for units.
Number of suburbs in each region with a median value of $500,000 or less, March 17
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%) and Darwin (7.5%) also have very 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%) and Darwin (90.6%).
Brisbane, Adelaide, Perth & Hobart: Residents of Brisbane (39.6%), Adelaide (47.9%), Perth (37.8%) and Hobart (76.6%) 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 across the city.
Both the ABC data and our research highlights that access to superannuation to purchase a home would largely 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 buyers with access to the housing market.
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 potentially elsewhere as well.