Push to widen KiwiSaver house-buying options

Proposal to allow big-city dwellers to buy out of town

People who live in a major city for their job but can’t afford to buy a home there could be allowed to use their KiwiSaver money to buy a property elsewhere, under a proposed change to the retirement savings scheme.

Currently, people who use their KiwiSaver money to buy their first home have to live in the property. That has presented challenges for people working in Auckland, Wellington and Tauranga where rising house prices have made it tough to get on the property ladder.

Interim Retirement Commissioner Peter Cordtz says relaxing the rules around KiwiSaver firsthome withdrawals could be one way to help more people buy a property and get better prepared for retirement.

“If they could buy a property in a more affordable part of the country, they could use it as an investment to progress on the property ladder or simply to retire to one day,” Cordtz said.

The proposal came from a Ma¯ori mortgage broker who was trying to help clients buy property near wha¯nau in areas other than where they worked.

It is being put up for discussion as part of the three-year review of retirement policy. The Retirement Commissioner will make final recommendations to the Government in December.

Cordtz said relaxing the KiwiSaver rules could help reverse declining rates of home ownership which have fallen from a high of 78 per cent in the 1980s to 55 per cent.

Ma¯ori and Pasifika have the lowest levels; only 35 per cent of Ma¯ori and 20 per cent of Pasifika own their own homes.

At the same time, a growing number of New Zealanders are heading into retirement with a mortgage. In 2007, about 78 per cent of over-65s had no mortgage but that fell to 72 per cent in 2017.

About 12 per cent of over-65s were now renting, and that has resulted in accommodation supplements paid out by the Government rising from $88 million in 2013 to $170m in the financial year ending March 2019.

The accommodation supplement is paid on top of NZ Superannuation which currently costs $39m a day and is expected to rise to $120m a day as a result of the ageing population.

Cordtz said NZ Super — $411 for a single person; $632 for a couple — was not designed to cover rent as there was an assumption “you have housing sorted,” he said.

Cordtz said if more people were able to get on the property ladder earlier, there might be less liability to taxpayers later.

KiwiSaver first withdrawals have risen quickly in recent years. In the year to June, nearly $1 billion was taken out by first-home buyers — up from $870m in 2018.

Some experts have previously questioned the wisdom of allowing people to take all their money out of KiwiSaver to buy a home, leaving people starting from scratch to save for retirement in their 30s or 40s.

Cordtz said since the prospect of a capital gains tax was scrapped, “property is still one of the best longterm investments people can make to help fund their retirement, as well as giving security of tenure”.

Loan Market mortgage adviser Bruce Patten said rules across the Tasman that allow Australians to use superannuation to buy property had left many in financial dire straits.

Aussies had borrowed heavily against their super with the plan of paying it down when they retire, “but they don’t have enough money to pay out the level of debt they have borrowed up against”.

He said the benefit of buying and living in your own property was you cared for it and hopefully added value. Allowing people to withdraw KiwiSaver to “buy any old property anywhere” opened the door to speculation and people losing money rather than building savings.

Public submissions on the review are open until October 31 and can be made through the website cffc.org.nz.