KEY POINTS:
Q. I am in Auckland, 36, and recently single from a de facto relationship.
I own no assets but have a nest egg of about $60,000 and am now looking for a new home. I am self-employed on an income of $65,000.
Would I be wise
to try to find something I can buy, and accommodate just me, or if it were feasible buy a house with bedrooms for flatmates, or should I just sit tight with financial investments making moderate returns and go renting/flatting in the current economic climate?
My lifestyle of choice would not be renting/flatting, and I do get that sinking feeling on missing the opportunity to ever own my own home anywhere close to where I work centrally.
A. Trying to time markets is always tricky, and often turns out to be a mug's game. So in a way it's a good thing that the housing market is so hard to foresee. Prices might well continue to rise, at least somewhat. There's also a pretty good chance they will fall.
Forget the market, then, and do what's best for you in non-financial terms. In your case - given that you've got a good solid deposit in your $60,000 - that means don't keep renting.
The choice, then, is between buying a small place for just you or a place with several large bedrooms for you and flatmates. There are probably some reasonable buys in the Auckland apartment market these days in either category - although a house might work better if you are taking in tenants.
I've seen the latter work really well in the right circumstances, with flatmates paying most or all of the mortgage. That could be a huge help if your revenue as a self-employed person was low for a while.
You'll want to buy in an area popular with renters, probably reasonably central or close to public transport. And you might want at least two bathrooms so you don't have to share with others.
Beyond that, whether it works for you will probably depend on your personality. Would you deal easily with a tenant who was much messier or fussier than you? Or one who was negative or argumentative? Or didn't pay their rent?
Does the idea of coming home to find others in the kitchen cooking a meal that they may share with you sound appealing or appalling? In the end, issues like that will probably make or break the plan.
One more thing: you do have an asset in the form of your savings. And that makes all the difference in these circumstances.
I wouldn't be so happy suggesting you buy property if you didn't have a decent deposit.
Q. My two children in their 20s have New Zealand passports and are presently living overseas.
Is it permissible for me to have them apply for KiwiSaver accounts on a non-employee basis and for me to pay in $1040 a year so that they gain the Government's equal contribution in addition to the $1000 kick-start? This should grow much faster than $1040 a year invested anywhere else.
It would give them a start when they return to New Zealand and wish to purchase a first home.
In a few years, should they decide to continue to live overseas, can they then use the emigration facility to withdraw from KiwiSaver? Would they still receive the Government contributions then?
A. To join KiwiSaver you must be a New Zealand citizen, or entitled to live in New Zealand indefinitely; personally present or normally personally present in New Zealand; and under the age of eligibility for New Zealand Super (currently 65).
State service employees serving outside New Zealand can also join. If you hold a temporary, visitor or student permit you can't join KiwiSaver.
The second point probably counts out your children at this stage, unless they are government workers. A pity, because as you say, their savings would grow much faster than elsewhere.
It's a bit frustrating that people like you appreciate the features of KiwiSaver, when your children can't make the most of it, while others could join but aren't bothering.
However, if your children did come back to New Zealand for a spell, they could sign up. I asked Inland Revenue how long they would have to be back here.
"Under current legislation a person only needs to be personally present and either a New Zealand citizen or entitled to be in New Zealand indefinitely at the time of enrolment," says a spokeswoman. "So New Zealand citizens living abroad can join KiwiSaver even if they are only in New Zealand for one day."
However, she continues: "Under the proposed changes to the KiwiSaver legislation the application section of the act will apply to people 'living or normally living in New Zealand', which if passed will come into effect April 1, 2008. This change will stop people from signing up to KiwiSaver when they visit New Zealand."
Sounds as if a quick trip home might be in order - or perhaps a longer stay later.
Assuming your children did join KiwiSaver at some point, if they went back overseas permanently some time later, they could withdraw their money after they have been away at least a year.
They would have to complete a statutory declaration that they were planning to stay away, and provide other proof, such as visas that permitted them to stay overseas.
If they did that, they would receive all the money in their account except the tax credits they have been given over the years. For example, if they received 10 years of $1043 tax credits, the Government would claim back $10,430. They would, however, still get the returns earned on those tax credits.
If they wanted to avoid losing the tax credits, they could leave their KiwiSaver account sitting dormant and take out the money when they reach New Zealand Super age - currently 65. At that point, regardless of what country they lived in, they would get all the money.
Q. Our son is working overseas and may not return. He has rental property in New Zealand.
Can he start a KiwiSaver programme by putting in $20 a week from his investments?
A. He's not the only one hoping that if he has investments in New Zealand, and is perhaps also paying tax here, that that will qualify him for KiwiSaver.
'Fraid not. If he's not present or normally present in this country, nothing else can make up for that.
Q. I am a New Zealand citizen, in my 40s and working as an overseas expatriate private worker; that is, not linked to or on behalf of the New Zealand Government.
My current employer does not do company contributions to my pension or equivalent.
I will return to New Zealand in several years either as a retiree or to continue to work then.
Under the above circumstances, would I qualify for KiwiSaver now? Or ever?
A. Not now, but when you return here - assuming that you get back here before you reach New Zealand Super age, and that the rules don't change in the meantime.
KiwiSaver is actually extra attractive for older people, because their money isn't tied up for long. Perhaps that will entice you back here.
Q. Our daughter is 19 and in her second year of a four-year tertiary course. She has a scholarship that pays her course fees and has a student loan that she gets $150 a week from. She also works 12 hours a week and earns $144 before tax.
We have money invested that we will use to pay off most of her student loan when she finishes her course. She then plans to work in New Zealand for a year or two before going on her OE.
Is there any advantage in her joining KiwiSaver, and would there be any problems when she is off on her OE, which might be for two to three years?
A. There are three reasons she should join KiwiSaver:
First, she might as well get her $1000 kick-start while the going is good. Who knows whether a future government might reduce or eliminate it.
Secondly, she will become eligible for a first-home subsidy. The subsidy ranges from $3000 after three years of contributing to KiwiSaver to $5000 after five years.
Thirdly, while she will have to contribute 4 per cent of her pay for at least a year - after which she can take a contributions holiday - that money will be matched by the government tax credit up to $1042.86 a year. That will be peanuts on her current pay but more when she works fulltime. And from next April her employer will also contribute if proposed legislation becomes law.
When she is overseas, she can continue to contribute if she wants to.
Whether she receives tax credits while away depends on whether her absence is temporary or permanent.
How is that decided? Well, the member's "principal place of residence" must be in New Zealand, unless they are working abroad for the state service.
"The determination of whether the member has their principal place of residence in New Zealand will be made by the member's scheme," says Inland Revenue. So I suppose it will depend on what your daughter tells her provider.
Another issue that may arise is whether the first-home subsidy clock keeps ticking while she is away.
The Housing Corporation, which is coming up with the details about the subsidy, says it hasn't yet decided that.
* Mary Holm is a seminar presenter, author and publisher. Her website is www.maryholm.com. Her 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 mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland. 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.