A growing number of young Kiwis are expecting the 'bank of mum and dad' to come to the party with a first home deposit, a KiwiSaver digital advice provider survey shows.
It comes as Core Logic figures show house prices in August were up by a whopping 27 percent on the same time last year, making it difficult for first-home buyers to get onto the property ladder. Real Estate Institute of New Zealand (REINZ) August data shows the national median house price was up 25.5 percent year-on-year, at $850,000.
A survey conducted by KiwiSaver adviser BetterSaver of 204 Kiwis aged 16-24 (July to August), shows over 80 percent expect to buy a home down the track.
Financial help from family, personal savings, and KiwiSaver were cited as the top three ways to get onto the property ladder.
Across this age group, 60 percent thought the average person would have to rely on family money to buy a first home. And over half expect their own family to pitch in when it comes their time to buy.
BetterSaver CEO Joe Taylor said the research is indicative of the Kiwi "she'll be right" attitude towards buying a home.
It shows the housing market is "difficult to crack" for young people. But it also raises questions on whether parents are aware their children are expecting help, and about the overall financial preparedness of young people, he said.
"A lot of people want to buy a home, but most aren't [putting themselves] in a position to do it...the 'bank of Mum of Dad' is an option for some people, but isn't for all," Taylor said.
After three years, KiwiSaver members can use the KiwiSaver first home withdrawal to withdraw most of their funds to buy a first home. Personal and employer contributions, together with the Government contribution (maximum $521.43 per year, minimum contributions of $1042.86), help the balance to grow.
Despite the first home withdrawal being an option to help people save a deposit, BetterSaver said data shows 70 percent of young Kiwis have never switched from the KiwiSaver default fund. This means they haven't actively chosen a fund that's right for their situation.
"For the vast majority of situations, a default fund is not the right fund for a young person aiming to buy a house in the future," Taylor added.
Nearly 20 percent wrongly assumed their KiwiSaver balance could only go up. And almost 60 percent didn't realise investing across multiple assets (e.g. a diversified KiwiSaver fund), decreases risk.
It's important young people check they're in the right fund for their situation - and have a plan to achieve their goal, Taylor said.
Among the survey's other findings were that four-fifths of 16 to 24-year olds depend on their parents for financial advice. Less than half had made a budget in the last year to help them save.
A CoreLogic first home buyer report released in May, 2021 shows the average age of a first home buyer is 34. After dipping from age 35 in 2017, the national average "has held steady at that figure ever since", the report says.
According to the report, the national median price paid by first home buyers over January to March, 2021 (the first quarter of 2021), was $650,000.
Based on CoreLogic data, a 20 percent deposit would require savings of $130,000, or $13,000 each year for ten years.
Although buying a home can seem like a long way off for a young person, the benefits of compound interest (interest reinvested) over time provides more opportunity for money to grow.
"Do something now...the sooner you get started, the faster you're going to reach your goal"," Taylor added.