Industry Super Australia (ISA) welcomes the proposal announced today by the Federal Labor Party on tackling housing affordability.
The policy proposes a ban on non-recourse borrowing arrangements in Self-Managed Super Funds (SMSF) as well as support for implementing a bond-aggregator model which could unlock substantial investment opportunities for superannuation funds in affordable housing.
The proposed policies would have a positive effect on worsening housing affordability especially in Sydney and Melbourne, while also help to develop a new asset class for institutional investment.
As recommended by the Financial System Inquiry, the removal of non-recourse borrowing arrangements would not only allow greater access to the housing market for first home-buyers it would also reduce the risks to the financial system posed by the buildup of leverage by SMSFs.
“Today’s announcement is a welcome proposal on tackling housing affordability concerns where they exist,” said Industry Super Australia chief economist, Stephen Anthony.
“There is a growing gap between available housing stock and first home buyers seeking to enter the market, this is exacerbated by the current non-recourse borrowing arrangements allowed within self-managed super funds. Removing these arrangements is a positive step forward for system as a whole”.
Mr Anthony said that the proposal to implement a bond-aggregator model could unlock a new asset class for institutional investors, and help ease the housing affordability supply side problems.
“Industry SuperFunds are willing investors in affordable housing where returns are viable and welcome suggestions of creating new opportunities for institutional investment.”
Mr Anthony said that other suggestions to tackle the housing crisis such as diverting super for housing deposits would increase prices and cripple super returns leaving members worse off in the long run.
“The super system relies heavily on compound interest over a member’s lifetime to drive adequate retirement outcomes. Dipping into super when balances are still relatively low will have negative effects on members’ ability to grow their balance and also lead to lack of diversification in their savings.
“The housing affordability crisis will not be resolved by damaging the superannuation system,” he said.
Stephen Anthony is available for interview. Media contact: Phil Davey 0414 867 188
The opinions above are those of the author in their capacity as spokesperson for Industry Super Australia (ISA). ISA, the authors and all other persons involved in the preparation of this information are thereby not giving legal, financial or professional advice for individual persons or organisations. Consider your own objectives, financial situation and needs before making a decision about superannuation because they are not taken into account in this information. You should consider the Product Disclosure Statement available from individual funds before making an investment decision. Industry Super Australia Pty Ltd ABN 72 158 563 270, Corporate Authorised Representative No. 426006 of Industry Fund Services Ltd ABN 54 007 016 195 AFSL 232514 MEDIA