Using Superannuation to Buy Property in Australia: Economic Perspectives and Emerging Models

As property prices continue to climb and home ownership feels increasingly out of reach for many Australians, particularly younger and lower-income earners, the debate about unlocking superannuation to purchase property has never been more relevant. Economists, policymakers, and the superannuation industry have weighed in on both the potential and pitfalls of such proposals, including recent innovations like shared equity ownership between a homeowner and their super fund.

Current Landscape: How Super Can Be Used Today

First Home Super Saver (FHSS) Scheme: Allows first-home buyers to withdraw up to $50,000 of voluntary super contributions (plus associated investment earnings) to help buy a home to live in—not for investment properties.
Self-Managed Super Funds (SMSFs): Can buy residential investment property, but strict rules prevent the fund members or their relatives from living in it or renting it.
Post-Retirement: Once eligible (generally at age 60 or 65), retirees can use their super for property any way they choose.

Proposals to directly unlock a portion of super to buy a first home or to allow a super fund to co-own a home with the member (shared equity) aim to address Australia’s housing affordability crisis and support earlier entry to the market.

What the Economists Say

Broad Opposition: Most leading economists oppose large-scale super-for-housing schemes, citing evidence that such policies primarily elevate property prices, rather than increase the proportion of homeowners. A 2025 survey found that only one out of 49 top economists supported letting super be withdrawn for housing deposits, with concerns centred on demand-boosting policies worsening affordability for future buyers rather than solving root supply issues.
Empirical Data: A study from the Centre for Independent Studies found that the median super balance of first-home buyers is nearly as high as their typical deposit—meaning access to super could nearly double effective deposit sizes. Estimates suggest the policy could bring forward home purchase by nearly three years for many young buyers and potentially increase home ownership by up to four percentage points, if widely adopted.

Making the Case: The Sole Purpose Test and Member Outcomes

A core regulatory consideration is the sole purpose test, which requires all superannuation investments and uses to be strictly for the purpose of providing retirement benefits. Allowing a super fund to co-own a member’s primary residence—strictly prohibited from use in investment or holiday homes—arguably passes this test under certain models. The key is that earlier home ownership, lower lifetime interest costs, and the elimination of a mortgage by retirement age all substantially improve an individual’s financial wellbeing in retirement.

By ensuring that the super equity stake is only available for a member’s primary residence—never for secondary homes or investment properties—the sole purpose of retirement benefit is maintained. Living mortgage-free in retirement is a significant advantage, lifting retirement standards and reducing the risk of financial stress due to housing costs. Should the member downsize later in life, any equity released by selling the home—proportional to the super’s stake—would flow back into their superannuation account, directly bolstering retirement savings. This mechanism ensures that the benefits are preserved for use in retirement, fulfilling the core intent of compulsory superannuation.

Emerging Models: Superannuation as Co-Owner

Co-ownership models, where the super fund holds a defined equity share in the property (potentially up to 50%), aim to:

Halve the upfront saving and ongoing mortgage requirements for buyers.
Reduce overall interest paid, enabling buyers to own their homes outright sooner.
Ensure superannuation is repaid its equity share (including capital gains) at sale, so lump sum withdrawals are avoided and windfalls to sellers are eliminated.
Apply strictly to a member’s primary place of residence, in line with the sole purpose test.

Benefits for Young Australians and Low-income Earners

Accelerated Home Ownership: By unlocking super as part-equity, many could access the property market earlier, bypassing extended years required to save a full deposit.
Interest Savings and Debt Reduction: With the super fund as equity partner, the home loan is smaller, directly translating into less interest accrued and reduced financial stress.
Home as Major Retirement Asset: For those whose home will be their largest asset, home ownership directly supports retirement security, supplementing the traditional superannuation nest egg.

Guardrails and Policy Mechanisms

Any sale would require the super fund’s percentage ownership—including any capital gains realised on sale—to be returned to the member’s super account.
Co-ownership structures would prohibit the member from “cashing out” or extracting the super-funded portion for non-retirement use, protecting retirement savings.
Policy design could place limits on how much super could be used (e.g., up to 50%) and include split of capital gains on sale to preserve system fairness and integrity.

Regulatory and Practical Blockers

The 'Sole Purpose Test': Australian super law requires all superannuation investments serve only for providing retirement benefits, making compliance crucial for any co-ownership model.
Product Rulings and Regulatory Clarity: There is presently no clear avenue for regulators such as APRA or the ATO to approve shared equity superannuation products, making industry implementation challenging.
Arm’s Length and Market Value: For SMSF co-ownership, rules require all transactions to be at arm’s length and at market rates, to avoid conflicts of interest.
Risks to Retirement Outcomes: Foregone super returns can outweigh mortgage interest savings over the long term, so unless investments appreciate strongly, there can be a net reduction in retirement wealth if not carefully managed.

Considerations and Closing Thoughts

Unlocking or co-investing super for home ownership carries a mix of substantial opportunity and acute risk. For young Australians and low-income earners, co-ownership schemes have the potential to change the landscape, offering earlier access to home ownership, reducing debt burden and channelling home equity into retirement well-being. By strictly tying super equity involvement to the primary residence and ensuring repayment to the super fund upon sale or downsize, the policy can satisfy the sole purpose test while directly improving retirement outcomes. However, regulatory safeguards, rigorous product design, and macroeconomic side effects—such as upward pressure on housing prices—must be carefully addressed. Policymakers and industry continue to debate whether Australia’s superannuation system is best served remaining purely a retirement income pillar, or whether it can also help bridge the generational and income-based barriers to owning a home.