Parents pump billions into market
‘‘The bank of mum and dad’’ has pumped billions of dollars into the property market, new data suggests.
Consumer NZ’s research found parents had doled out $22.6 billion in loans, based on 208,000 parents supporting their kids financially to buy a property at some point in the past, and with an average contribution of $108,000.
By comparison, ANZ has just over $71 billion in current lending to owner-occupiers.
The most common form of assistance was contributing towards a deposit, with more than half of parents helping in this manner. Three out of five parents did not expect to be repaid.
In 2002, the average house price in New Zealand was $186,000, which was six times the average income of $29,432 per year.
In 2022, the median house price has risen to $890,000, more than 15 times the median income of $56,836. Consumer NZ spokesperson Gemma Rasmussen said the ‘‘bank of mum and dad’’ was now more pivotal in the first-home buying process, but it also meant that there was a greater social divide of who was able to buy a first home, and who was not.
‘‘We’ve reached a point in New Zealand where it’s no longer enough to do all ‘the right things’ to buy your first home – to get a job with a good income, save furiously and cut back on the ‘nice to haves’.’’
She said 87% of parents either offered to or were happy to help get their children on the property ladder. ‘‘There is recognition that a first-home purchase isn’t as straightforward as it was 20 years ago, which is why many parents are so willing to help.’’
The majority of parents dipped into their own savings to help with a home deposit, but nearly one in four cut back on expenses to make their contribution possible.
Of those who expected repayment, 82% expected to be repaid in full. More than half of parents offered assistance to multiple children. In Auckland, parents were significantly more likely to assist their adult children, with 58% lending a hand. They lent close to $20,000 more than the national average, but this could be due to the higher-than-average house prices, Rasmussen said.
Financial adviser at Edge Mortgages Glen McLeod said the first-home buyers he dealt with were often living rent-free to enable them to build their deposit, or their parents were willing to provide funds towards it.
He said buyers were facing loan-to-value restrictions requiring larger deposits, and the new lending rules that required banks to be more stringent in assessing affordability. Chief executive of Financial Advice NZ Katrina Shanks said it was interesting Consumer NZ reported 62% of parents used their savings to cover the support they provided their children.