Could KiwiSaver help more first-home buyers get onto the property ladder?

Commissioner floats idea of investment properties qualifying for first-home withdrawals
Proposal to consider investment properties for KiwiSaver first-home withdrawals. Photo credit: Getty.

A proposed change to KiwiSaver first home withdrawal rules could help some people get started in property sooner.

While not a direct route to moving out of the rent trap, first-home buyers may be able to buy an investment property and rent it out as a way to get started.

In a compulsory three-year review of retirement income policies, Peter Cordtz, retirement commissioner, will look at whether first-home buyers can withdraw KiwiSaver funds to buy an investment property - widening the current rules which allow purchase of a home to live in.

Statistics New Zealand data currently puts the rate of Kiwi homeownership at around 55 percent, a figure which Cordtz is keen to see improve.
“The cost of declining homeownership is a problem that affects all of us and we need a circuit breaker," he said.

Rising prices in main centres make it challenging to buy close to work.  Under the proposed change, KiwiSaver members could use their savings to help them buy somewhere else, having the option to trade up, or give the tenants notice and live in it themselves.

“If we can get more people on the property ladder earlier, there may be less liability to taxpayers later," Cordtz explained.

Cordtz said that despite around 12 percent of over 65's still renting, based on the current amount of NZ Super, ($411 for a single person and $632 for a couple), the system assumes people are homeowners.

“If we can get more people on the property ladder earlier, there may be less liability to taxpayers later.”

Under current rules for KiwiSaver first-home withdrawals, members have to be in KiwiSaver for at least three years and live in the property for a minimum of six months.
Martin Hawes, financial adviser and chair of Summer KiwiSaver Investment Committee said that as KiwiSaver's main purpose is retirement savings, adding withdrawals for investment properties could mean it does too much and nothing well.

"What we need to provide is a financial product that allows people to save in the area they're saving for and [that] grows at the same rate."

Funds investing in commercial property have some correlation to residential, but as first-home buyers have specific needs, the latter would be more effective.

"I would be looking for encouragement from fund managers to develop products specifically for home buyers," Hawes said.

The proposal to widen KiwiSaver first-home withdrawal rules to include an investment property is open to public submission until the end of October.  

Cordtz is to present recommendations to the Government at the end of the year.