She's On The Money - Why a Super-for-Housing Policy Could Actually Push Prices Higher

Episode Date: March 21, 2025

There’s a lot of noise right now about using your superannuation to help buy your first home. And on the surface? It sounds pretty good. But in this episode, I break down show you exactly what happened when New Zealand tried this approach—and why it ended up hurting the very people it was meant to help. We’ll talk about rising prices, the impact on long-term wealth, and why this policy could affect everyone with super—not just first-time buyers. If you're thinking “but it’s my money, why not use it?”, this episode will make you think twice. Want to feel more confident with your investing? Our Investing Masterclass is now open for enrollments... come join us here! Starts April 1.  Join our 300K+ She's on the Money community in our Facebook Group and on Instagram.  Acknowledgement of Country By Natarsha Bamblett aka Queen Acknowledgements. The advice shared on She's On The Money is general in nature and does not consider your individual circumstances. She's On The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs.  Victoria Devine and She's On The Money are authorised representatives of Money Sherpa PTY LTD ABN - 321649 27708,  AFSL - 451289.See omnystudio.com/listener for privacy information.

Hello, my name is Natasha Nabanunga-Bamblett. I'm a proud Yorta Yorta, Kurni, Wolperi and Awadjuri woman. And before we get started on She's on the Money podcast, I would like to acknowledge the traditional custodians of the land of which this podcast is recorded on Awadjuri country, acknowledging the elders, the ancestors and the next generation coming through. As this podcast is about connecting, empowering, knowledge sharing and the storytelling of you to make a difference for today and lasting impact for tomorrow. Let's get into it. She's on the money. She's on the money.

Hello and welcome to She's On The Money, the podcast that's helping you sort out your finances now so future you can live their best life. There's been a lot of chatter recently about a policy idea that could help first home buyers break into the market sooner. And if you've heard of it already, I'm sure you're thinking, wow, V, that sounds so great. But before we get too excited, what if I told you we don't actually have to guess how this is going to turn out? I'm Victoria Devine. And today for this special bonus Saturday episode, you and I are going to look across the ditch to see what happened when New Zealand tried almost the exact same thing. I'm just going to spoil it for you real quick here. It didn't actually go quite as planned.

But first, I want you to imagine a policy that makes houses more expensive, reduces retirement savings and increased government spending. Would you vote for it? Probably not. Well, actually, our Kiwi friends across the ditch introduced a scheme that let first home buyers dip into their super, which is actually called KiwiSaver over there to buy a home, which in theory sounds fantastic because who doesn't want to help first home buyers get into their first home quicker. But let's talk about what actually happened. Let me set, I guess, the scene. You're a first home buyer. You have been diligently saving every single dollar. You've been topping up your retirement fund, your super, your KiwiSaver, same, same. You're going to stash away extra cash and

then you're doing everything right. All of a sudden, the government says, hey, you can actually dip into your super or your KiwiSaver for house deposit. You're going to go, oh my goodness, this has been so hard. How good. I would absolutely love to do that because this has been honestly a long slog and it is getting further and further away from being reality. That three bedroom place in a really great suburb actually starts to feel a little bit more in reach. but here's the catch. You're literally not the only one with this idea. There are thousands of other first home buyers who are thinking exactly the same thing. And suddenly at every single auction, everyone's budget has an extra 50 grand in it. That house that was listed at 600 grand,

well, now it's $650,000. Prices rise, competition is heating up. And you know what happens in the end, you are still locked out of the market. And am I guessing? No, because that's exactly what played out for our friends in New Zealand. After they introduced this policy, house prices started rising even faster, jumping from 7.6% to 9.2% per year. Buyers suddenly had more money to spend, which in theory was a good idea, but so did their competition. So sellers just raised the prices to match. With deposits struggling to keep up, buyers had to borrow more money just to stay in the game and the proportion of high loan to value ratio mortgages taken by first home buyers actually skyrocketed from 25% to 75% since 2014. What does that actually mean? Well, people were stretching

themselves really thin. They were taking on bigger mortgages relative to their deposits, leaving them vulnerable to even more financial stress. If interest rates rose or life threw in an unexpected curveball like a job loss or maybe an emergency expense, many had not much financial cushioning to fall back on. But you know what the hardest hit was? Lower income earners and renters. They couldn't access as much from KiwiSaver, yet they still faced skyrocketing house prices. Meanwhile, the biggest winners, they were the property investors. While first home buyers were dipping into their retirement savings just to get on the ladder, just to compete, investors sat back and they watched their property values climb.

Higher deposits pushed prices up, making homes even more expensive and played right into the hands of those who already had multiple properties. So instead of levelling the playing field, this policy did the exact opposite. First home buyers were left with bigger debts, higher risks and fewer opportunities to get into the market. All while the housing affordability crisis only got worse. And you know what? Here's the wild part, if you didn't think that was wild. This policy wasn't just ineffective, it actually made home ownership rates worse. In New Zealand, home ownership of people in their 30s dropped by 7% instead of increasing.

So despite all that extra money being pumped into the market, fewer young people were actually ending up owning homes. And here's something telling, 77% of first home buyers in New Zealand now use their super to buy a home, up from 65% in 2015. That means more and more young buyers have to dip into their retirement savings just to compete in the housing market. Now, 379,000 New Zealanders have collectively withdrawn, in New Zealand dollars, $10 billion from their retirement accounts. That's $10 billion not growing for their retirement. And all for what? To chase incredibly expensive homes in a market that's been artificially heated by the very policy meant to cool it down? Oh, and did I mention that the New Zealand Treasury

explicitly warned that this would happen. They literally said this scheme would stimulate demand and increase house prices. And you know what? They weren't wrong. They were very on the money. Stay with me because after the break, we're going to zoom out and we're going to look at what this could actually mean for Australians, not just homebuyers. Welcome back, my friends. We have been chatting about the proposal to let Australians dip into their superannuation for house deposits, and why the New Zealand experience should make us stop and think. But it's not just about house prices, right? Let's talk about what happens to your superannuation when you're not investing it optimally. Australian MySuper balanced options

achieve about 7.8% returns annually, compared to just 6.64% for KiwiSaver balanced options. That difference might seem really small, but over 40 years of working life, it is massive. KiwiSaver funds hold 16.5% less in growth assets than Australian super funds, largely because they need to keep more money accessible for these housing withdrawals. That means funds take fewer investment risks and generate lower long-term returns because of this policy. This affects everyone with super, not just homebuyers, right? If Australian funds had to accommodate large scale withdrawals for housing, which they might have to, they'd likely be forced into taking more conservative investment strategies to make sure that they have enough cash on hand

to deal with this. That means less money invested in high growth assets and over time, lower returns for literally all of their members, whether you're buying a home or not. And I need you to remember, our super system was designed to reduce the reliance on the aged pension. Australia's pension expenditure is projected to decrease from 2.5% to 2.3% of GDP by 2060. Meanwhile, New Zealand's pension costs are actually expected to increase over the same period of time. As one economist put it, it's robbing your future self to pay your present landlord, except the landlord just charges more. Actually, speaking of economists, did you know how many support this idea? Actually, almost none. When 48 out of 49 economists think something is a bad

idea, maybe we should listen and stop playing into social media hype. Here's the real issue. Australia is already 100,000 homes behind schedule every single year. That means even if every single first home buyer magically had a deposit tomorrow, there still wouldn't be enough houses to purchase. That's the problem with this policy. It doesn't build more homes. It gives buyers more money to compete for the same limited supply. And when more people are fighting over the same number of houses,

do you know what happens? Prices go up, not down. So what would help with housing affordability? Okay, so stepping back, first we need more supply. That means planning reform, infrastructure investment and incentives for building more diverse and affordable housing types. New Zealand actually had success with this in Auckland. In 2016, they changed zoning laws to allow more housing types like townhomes and apartments and multi-unit dwellings in areas that previously only actually allowed standalone houses. And the result of this was that rents in Auckland dropped by 28% compared to what they would have

been without these changes. Impressive, right? More homes meant less competition, lower prices, and better affordability, unsurprisingly. Second, what we need to do is look at the tax rules that shape our housing market. Right now, some policies make investing in property way more attractive than other types of investing, which doesn't exactly help with first home buyers trying to get their foot in the door for the first time. We could boost first home buyer grants or saving schemes that don't raid retirement funds, like expanding the first home super saver scheme without allowing direct withdrawals from the main super balance. So what have we learned from our Kiwi neighbours across the ditch and their home ownership experience. The housing crisis is very

real, but this policy is like trying to put out fire with petrol. Our super system is literally the envy of the world. Why are we so keen to break something that's working? The biggest winners in this policy are current homeowners who are going to see their property values increase even more, not first home buyers who the policy is supposedly designed to help. We are all complaining about house prices while considering a policy that's proven to make them higher. Make that make sense to me. The Australian super system is doing what it was designed to do, help Australians build wealth for retirement. Let's not sacrifice our financial future security for a short-term housing sugar hit that ultimately makes the problem even worse.

If you also feel strongly about this, I would love if you could share this episode with your friends, your family, and anyone who you think might be thinking super for housing sounds like a super idea. And don't forget to like and subscribe so that I can keep bringing you the content that you love. My friend, that is literally it for me on this Saturday. I am so worked up but i hope that we are on the same page now i hope you enjoy your weekend and i will see you bright and early on monday for a money diary the advice shared on she's on the money is general in nature and does not consider your individual circumstances she's on the money exists purely for educational purposes and should not be relied upon to make an investment or financial decision

If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs. Victoria Devine and She's On The Money are authorised representatives of MoneySherpa PTY LTD ABN 321 649 27708 AFSL 451 289. Thank you.