With me on short-term contracts, and my partner working 60-plus hours on the minimum wage, we slaved, saved and borrowed from family and bought a modest section outright for less than $100,000.
Our plan was to save as much money as we could, when we could, and borrow only what we had to from the banks.
Now, almost three years later, we have decided to go ahead and build. As this is to be our first-ever home, I contacted Housing NZ about a first-home grant and withdrawing from our KiwiSaver accounts, only to be told that as we had already bought our land, we weren't eligible to get any of that money at all.
When we purchased the land we paid a lawyer to oversee the sale. Now I am thinking that he should have brought this kind of thing to our attention.
We still have no home, nor have we ever owned one, but because of a technicality we aren't considered first-home buyers. I calculated there is about $40,000 we would have been able to get between the grant and the savings.
Is there any way around this, other than to sell our land, fritter the proceeds away to be below the threshold and start again from scratch?
It seems unfair. You've done really well zeroing in on a realistic goal and making it happen. But the plan you outline in your last sentence seems to be the only way you might get your hands on KiwiSaver first-home help. Still, the situation is perhaps not as dire as you think.
For the benefit of others, KiwiSaver first-home help has two aspects:
• Savings withdrawal. After three years, everyone - on any income and buying a house in any price bracket - can withdraw everything in their KiwiSaver account except $1000.
• The KiwiSaver HomeStart grant of $3000 after three years, $4000 after four years or $5000 after five or more years. A couple can get twice that and the amounts are doubled if you buy a newly built home.
To get the grant - a gift from the government - you must have regularly contributed to KiwiSaver and need a deposit of at least 10 per cent of the price. And there's a household income cap of $85,000 (before tax) for one buyer, or $130,000 for two or more buyers.
There are also price caps on existing houses as follows: $600,000 in Auckland; $500,000 in Hamilton, Tauranga, Western Bay of Plenty, Kapiti Coast, Porirua, Upper Hutt, Hutt City, Wellington, Tasman, Nelson, Waimakariri, Christchurch, Selwyn, and Queenstown Lakes; and $400,000 elsewhere.
On newly built houses, add $50,000 to each of the caps.
Getting back to our correspondent, of the $40,000 you had hoped to receive, $20,000 is presumably a HomeStart grant - given that your home would have been newly built.
But, said a Housing NZ spokesman, "The KiwiSaver HomeStart grant (as well as the KiwiSaver first-home savings withdrawal) funds must be used for the purchase of an estate in land. And given that they already own the section, it means that they now have an interest in an estate, making them ineligible for the grant and the savings withdrawal."
If it's any comfort, he has some sympathy for you. When I asked the spokesman if there's any way you could get around this, he replied "Unfortunately not."
Okay, I said, but what if you do as you suggest, "sell our land, fritter our money away to be below the threshold and start again from scratch"?
What we're talking about here is something you apparently know about, but many others don't. People who have previously owned a home but no longer do - and aren't well off - may be eligible for the both the withdrawal and the grant.
Replied the spokesman, "the general eligibility criteria for the KiwiSaver HomeStart grant are the same whether they are a first-home buyer or not.
However, there is an additional criterion that previous home owners are required to meet - that they have realisable assets totalling no more than 20 per cent of the house price cap (for existing older properties) for the area that they are buying in."
That means the assets must total less than $120,000 if you're buying in Auckland, $100,000 in Hamilton, etc, and $80,000 elsewhere.
"Realisable assets" include savings and investments, boats or caravans worth more than $5000, vehicles other than your main car and other assets worth more than $5000.
Unless your section has soared in value, by the time you've sold it and paid back the family loan you might not have to fritter away much to be eligible.
Normally, I despise people who game the system - especially when it involves taxpayer dollars. But I wouldn't blame you if you "frittered" the money into a new main car. Just a thought.
The moral of the story is to check your situation early on. "Applications for the KiwiSaver HomeStart grant and Savings Withdrawal need to be submitted at least 20 working days prior to the purchase of a property, including the purchase of land on which someone intends to build a home," says the spokesman.
"Had they applied prior to the purchase of the section, then they might have been eligible for the HomeStart grant and Savings Withdrawal (subject to standard eligibility criteria)."
He adds, "if people are unsure or have any questions about the KiwiSaver HomeStart grant or the KiwiSaver first-home withdrawal, they can go to kiwisaver-homestart.co.nz , email firstname.lastname@example.org or call 0508 935 266."
By the way, I agree that the lawyer should have brought this to your attention. But it's probably not worth pursuing that, beyond telling him what's happened so he isn't as neglectful to others. Looking backwards at what went wrong is draining. I would much rather see you getting on with your frittering plan.
Shares v property
Each investor must decide which path they feel comfortable with. Some of us like property because we can see it and usually have some understanding of the local market, etc.
Some of us like shares because of an interest in business in general. My father had a New Zealand share portfolio he watched with interest for many years. He bought and sold rarely, generally held shares for long periods and did well. A passive alternative is index funds.
Property and shares will both make you more than you can earn at the bank, because they have more risk. Property earns rent, shares earn dividends.
Both have a capital gain which is tax-free if investing for the long term. Both can be leveraged (you borrow to invest in them), and the interest cost deducted from income.
Shares do have the ability to be a drip-fed investment, whereas property is usually large chunks of investment.
Debating which is the better investment historically is no predictor of the future. Shares and property could both rise and fall.
There is no best investment. The main thing is to be comfortable with the sector you are in, and you are therefore likely to stay in the investment long term and reap the benefits. Your comments please.
I agree - with a couple of minor exceptions:
• To your comment that "Property and shares will both make you more than you can earn at the bank," I would insert "probably" and "over the long term".
• Long-term capital gains aren't necessarily tax-free. It depends whether you bought the property or shares with the intention of selling at a profit. If yes, then the gains are taxable.
Ignore the crowd
I bought a do-upper outside Auckland for a home with savings and lived in it and did it up from 2009.
Later, with equity, I bought a second property near the first property, did it up and rented it out. Note both properties were bought for much less than their valuation.
I read somewhere that you make your profit at the price you buy an investment.
If you buy shares because everybody is buying and the price is high, or buy property and renovate and sell because everyone is doing it, it is probably not a good way to go about it.
I crunch the numbers on the time and cost spent renovating, tax, etc, before buying, as well as research whether to buy shares or property, and if the numbers don't work, I walk away.
My personal experience has been shares are easier to invest in, as a large amount is not needed to start. But it is kind of boring and kind of out of your control, as shares are managed mostly by funds, and markets cannot be timed.
Property is more exciting and can be improved to increase value and returns, but harder to get into as it needs a higher deposit, among other costs. Personally, I love doing up houses and, on paper, have made higher returns on it.
You're absolutely right about not following the crowd in investing, and about the importance of price. Even if you buy a super property or shares in a great company, you won't get rich if you pay too much for them.
Funnily enough, your objections to shares - that they are boring and other people do the admin - are the very reasons some people prefer them over property.
One more comment: you're right that the share market can't be timed successfully. But nor can the property market.
In response to your final Q and A last week, yes, but who wants to be agnostic - the literal meaning of which is to know nothing? Lol.
We'd better not laugh too hard. Read on.
Known and unknown
The word "atheist" comes from the Greek "atheos" (a- means without and "theos" means god). Atheism is therefore "lack of belief in the existence of gods or God" and is not a "belief" that no gods or God exist. It is precisely the opposite - it's a "lack" of belief (without theism).
An agnostic is a person who believes that nothing is known or can be known of the existence or nature of God. Thus, atheism is "not believing" and agnosticism is "not knowing". They aren't mutually exclusive. In my experience, most people (believers and nonbelievers alike) tend to be agnostic.
Perhaps we should just stick to financial matters in your column. Some people (especially gnostic theists) may not appreciate your attempt at humour by quoting the Urban Dictionary, cleaned up or not!
Perhaps we should indeed, although I always enjoy our little excursions down byways - just for a change.
- Mary Holm is a freelance journalist, a director of the Financial Markets Authority and Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. Her website is www.maryholm.com. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to email@example.com or Money Column, Private Bag 92198 Victoria St West, Auckland 1142. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.