As housing prices rise in New Zealand, there have been calls for KiwiSaver regulations to be relaxed.
KiwiSaver has helped thousands of New Zealanders own their first home in the recent years. Despite this, some people are calling for further relaxation of the rules to help others enter the housing market.
A recent Newsroom article highlighted some experts expressing their opinion on how it could be improved. These experts’ opinions will be discussed in this article.
Janet Harris, a mortgage advisor, believes rules should be changed.
She told Newsroom that some people who have used their KiwiSaver funds to buy their first home are unable to keep it. As a result, she believes they should be able to have a second go at withdrawing money from their KiwiSaver account to buy property. She explained that the circumstances can vary widely, such as a relationship breakup or a business failure that forces someone to sell their home to pay off debts.
At the moment, New Zealand law allows someone who has previously owned or currently owns property to withdraw their KiwiSaver funds to buy their first home. However, one must fall under the limited number of exceptions to be eligible.
These exceptions include if the property you owned was leasehold land, or if instead of holding the property in your name, you owned shares in a company that owned the land. Depending on whether you meet the exceptions or not, you may need to apply to Kāinga Ora to confirm you are in the same position as a first home buyer.
However, if you have withdrawn money from your KiwiSaver account to buy a home once, you cannot withdraw your KiwiSaver funds to buy a home a second time.
This isn’t the only exception that experts believe warrants further review. Additionally, individuals are currently unable to withdraw money to build a first home on land or to purchase a rental property.
The Commission for Financial Capability (CFFC) has asked the Government to project what could happen if one was allowed to withdraw their KiwiSaver funds to buy a house that wasn’t owner occupied.
Tom Hartmann (Personal Finance Leader, CFFC) said that there is a lot of fear in such a proposal. He therefore believes people with housing expertise need to help out by modelling the impacts of this.
Hartmann points out that owning a home is one way to grow wealth. For those shut out of Auckland’s housing market for example, one could potentially buy outside of Auckland to increase their net worth.
Frasey Whineray (Chief Operating Officer of Fonterra and chair of the Prime Minister’s Business Advisory Council) argues that our KiwiSaver money should be invested into local housing projects, so that us Kiwis will have a stake in infrastructure investment.
This can be considered a double knockout punch – investors get more diversified investments and the supply of housing will increase as well.
Economist Shamubeel Eaqub pointed out that if supply does not increase in the housing market, simply relaxing the withdrawal rules will increase the house prices further.
He believes the reason why we have high housing prices is because of a lack of supply. Eaqub is weary about relaxing the rules for a first home withdrawal if there is no simultaneous increase in the supply of housing.
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