Unpicking concerns about using superannuation for housing and retiring with a mortgage

Tightening up the debate with straight facts and fresh economics

Paid FET subscribers get access to this article, the growing charts page, and in May, the audiobook of The Great Housing Hijack via the FET podcast.

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The debate about superannuation is loose.¹

One controversial part of the superannuation debate revolves around the financial conflict between housing and super. If you save more of your income in the form of non-housing assets in superannuation it makes it harder to save more of your income in the form of housing that you occupy.

This is an indisputable tension (comment if you think otherwise).

But despite this indisputable trade-off, many people still think that allowing your income to be spent on housing, or any other goods and services, rather than superannuation, is a bad idea.

Two arguments dominate this side of the debate.

1. People are already excessively leveraged into housing, with mortgages lasting much later in life, so allowing this process to be amplified would be bad. As one news article put it: “What would a retiree live on if they pillage their super to pay off the house?”

2. Using superannuation to buy housing will increase home prices, making it harder for others to buy, and undermining the net homeownership benefits. As one news article put it: “Experts warn that letting first-home buyers use their superannuation as security to purchase a property could turbocharge price rises without a boost to housing supply.”

To be honest, these arguments once concerned me too. It took me years to take the emotion out of housing and see the underlying economics. Once you do this, you realise there that these concerns are not as important as they first appear—or not important at all.

Let’s examine the data and discuss the economics at play to see why these concerns are misplaced.

Leveraged lives and retirees with a mortgage

It is true in Australia that the proportion of households that have a mortgage later in life is rising. Below is a chart (hat tip to

Avid Commentator

) comparing the share of households that owned their home outright in 2001 and 2021 across age groups.²