KiwiSaver investment property idea

AUCKLAND: People who live in an expensive housing area for work but cannot 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.

At present, 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 Queenstown, Auckland, Wellington and Tauranga, where rising house prices have made it tough to get on the property ladder.

Interim retirement commissioner Peter Cordtz said yesterday relaxing the rules on KiwiSaver firsthome withdrawals could help more people buy a property and be 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,’’ Mr Cordtz said.

The proposal came from a Maori mortgage broker who was trying to help clients buy property near whanau in areas other than where they worked.

It is being put up for discussion as part of the threeyear review of retirement policy, after which the retirement commissioner will make final recommendations to the Government in December.

Mr Cordtz said relaxing the KiwiSaver rules could be a way of reversing the declining rates of home ownership in New Zealand which have fallen from a high of 78% in the 1980s to 55% today.

Maori and Pasifika have the lowest levels of home ownership, only 35% of Maori and 20% of Pasifika owning their own homes.

At the same time, more New Zealanders are heading into retirement with a mortgage.

In 2007, around 78% of over65s had no mortgage, but that fell to 72% in 2017.

About 12% of over65s were now renting, meaning a 92% increase in the amount of accommodation supplement paid out by the Government in the past six years.

It has risen from $88 million in 2013 to $170 million in the year to March 2019.

The accommodation supplement is paid on top of New Zealand Superannuation, which now costs $39 million a day and is expected to rise to $120 million a day as a result of the ageing population.

Mr Cordtz said New Zealand super was not meant to cover rent.

‘‘It currently pays $411 for a single person; $632 for a couple. At that rate, it assumes you have housing sorted,’’ he said.

‘‘The cost of declining home ownership . . . affects all of us, and we need a circuitbreaker.’’

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

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

‘‘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,’’ Mr Cordtz said.

But Loan Market mortgage adviser Bruce Patten said flexible rules allowing Australians to use superannuation to buy property had left many in dire financial straits after borrowing heavily against their super..

‘‘But what’s eventually happening is they don’t have enough money to pay out the level of debt they have borrowed up against.’’

Allowing people to withdraw KiwiSaver and ‘‘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. — The New Zealand Herald

❛ 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