The decline in home ownership will create trouble for the retirement capability of many Australians, First State Super chief executive Michael Dwyer says.

The superannuation system’s original design assumed members would be property owner-occupiers and would have that asset in retirement, negating the need to pay rent and giving the option of releasing significant capital through downsizing.

“Tomorrow’s retirees, however, will be in a different position. For them, housing is increasingly out of reach, which means they will need to rely on super or other investments as their primary income in retirement, [when they’ll still be paying significant amounts in rent],” Dwyer told delegates at the Australian Securities and Investments Commission Annual Forum in Sydney on Tuesday, March 21, 2017.

Research released by the Association of Superannuation Funds of Australia (ASFA) in March shows that for a couple to rent in a capital city and have a comfortable standard of living, they would need more than $1 million in superannuation. If they owned their own home, they would need $545,000 to be comfortable. The current median account balance for a 55- to 64-year-old is $180,000, with the mean balance at $315,430.

In 1994, two years after the super guarantee arrived, the Australian Bureau of Statistics noted that Australia had one of the highest rates of home ownership in the OECD, at about 70 per cent.

“My generation had access to prime land, inner-city property and strong capital growth; therefore, we have the choice of downsizing over the next two to three decades,” Dwyer told delegates. “We will have the security of a roof over our heads in our old age, which will protect us financially and contribute to emotional wellbeing.”

He added that in 1992, first-time buyers represented 20 per cent of property purchases, while upgraders represented 65 per cent. In 2017, first-time buyers represented less than 10 per cent and upgraders had fallen to 45 per cent.

“So we see a generational change in the role property plays in relation to retirement assets,” Dwyer said.

“That prospect doesn’t match the original spirit of super, where it was assumed most people would have a roof over their head when they retired.”

Super should not be used for housing

Presenting with Dwyer was Self-Managed Superannuation Funds Association director and outgoing chief executive Andrea Slattery.

She was critical of the recurrent idea that superannuation savings should be used to fund first-time homebuyers.

“It is very tempting to say to a 25 year-old they can deplete their super to enter the housing market, but, in actual fact, that inflates prices and creates its own problems,” Slattery said.

At June 30, 2016, the total pool of assets in SMSFs was $599 billion, with the asset allocation to residential real property totalling $24.4 billion – or just over 4 per cent – Australian Taxation Office data shows.