Concerned about declining home ownership levels and a sharp fall in the proportion of buyers purchasing their first property, the Real Estate Institute of Australia (REIA) wants first homebuyers to be able to tap into their superannuation savings to help them scrape together a deposit.

The group’s president, Peter Bushby, says first homebuyers are finding it increasingly difficult to enter the housing market, in part due to stricter lending policies from financial providers. His organsiation has called for a rethink of housing policies.

In an election policy statement released yesterday, the Real Estate Institute of Australia notes: “Home ownership is declining after three decades of stable levels.

“Over the five years to 2011, home ownership declined by 1.1 percentage points to 67 per cent of occupied private dwellings. The drop was evident across all states and territories and was most pronounced in the 35 to 54 age group.”

The institute says recent interest rate cuts have had little impact on the desire of potential first homebuyers to enter the market.

Bushby says the proportion of first homebuyers entering the market has historically “been around the 20 per cent mark” but has dropped to 14 per cent of late.

The institute cites two schemes operating overseas – in Singapore and Canada – that allow first homebuyers to use their superannuation savings when they buy a property.

“The approach Singapore has adopted to tackle house ownership since the 1960s has been very successful, with the level of home ownership in Singapore at 87.2 per cent. This compares to a level of around 70 per cent in Australia for many decades,” the statement notes.

In Singapore, The Central Provident Fund mandates that a portion of an employee’s salary is set aside for retirement, healthcare and housing. A slice of the funds can be drawn down by first homebuyers who have amassed at least a 5 per cent property deposit with their own savings.

Canada also has a scheme that allows first homebuyers to withdraw funds from their retirement savings plans.

The Canadian Home Buyers’ Plan lets first homebuyers withdraw up to $25,000 from their retirement savings to purchase or build a home. The funds must be repaid within 15 years in annual installments.

Critics of the scheme say that it reduces participants’ overall retirement funds as they lose the benefit of having their money invested in savings for longer periods. Canadian Government figures also show that nearly half of the participants in the scheme failed to repay their full annual installment in 2011.

The REIA says the scheme has operated in Canada since 1992 and about 12.5 per cent of Canadian first homebuyers aged 25 to 44 use it. While that figure may not seem big, Bushby says it is quite significant.

“If you saw a 12.5 per cent increase in people entering the market because of the extra capacity to be there, I think it would have a fairly significant effect,” he says.

“We believe the stimulus will help the whole market, not just the first homebuyers because we need more people buying the cheaper stock to enable those [people] in those properties to step up and that has a progressive effect through the market itself.”

The institute has not done any modelling on how much money younger homebuyers would have amassed in their superannuation savings.

“They are not necessarily going to have massive amounts of superannuation built up but we see it as an adjunct to the existing first home owners savings scheme that the government has got in place,” says Bushby.

The REIA has also called on state and territory government to reverse the trend to only offer first homebuyers grants for new dwellings. “It’s excluding 80-odd per cent of people who have historically bought established homes,” Bushby says.

Is tapping into super a good idea for first homebuyers? If so, is there a ‘right’ way to do it?

The original release of this article first appeared on the website of Hangzhou Night Net.

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