Thousands tap KiwiSaver for ‘second chance’ at home ownership

The number of people who previously owned homes but are withdrawing money from their KiwiSaver accounts for a “second chance” at the property market is tipped to keep increasing. Photo / Michael Craig

By Susan Edmunds of RNZ

Thousands of people who have previously owned their own homes are withdrawing money from their KiwiSaver accounts for a “second chance” at the property market.

KiwiSaver money can generally only be withdrawn when someone buys a first house or retires – except in case of serious financial hardship.

But there is a provision that people can withdraw their money to buy a house if they are deemed to be in the same financial position as someone who has never owned a property.

That is generally measured as not having “realisable assets” of more than 20% of the First Home Grant price cap for an existing home in their area.

They also need to not have withdrawn their money from KiwiSaver for a first home previously.

The assessment is conducted by Kāinga Ora, which said in the September quarter it received 1341 applications and approved 1121. The quarter before, it approved 1017.

The number appears to be steadily increasing – in the last quarter of 2023 there were 758 approved. Kāinga Ora said the number approved had picked up since the September 2019 quarter after the removal of an income cap test.

Kernel Wealth founder Dean Anderson said he expected the numbers to continue to grow and there might be some people who did not realise it was an option.

“Over the last 10 or 15 years houses have become really expensive and we’ve seen how people buy property change.

“A growing number of people are buying a home with friends or family members rather than just on their own because they can’t afford it, relationships are changing – we’re getting married later or not at all.”

He said those factors combined meant it was increasingly common for people whose circumstances changed to find they were back in the position of a first-home buyer.

“As KiwiSaver balances have gone up, that’s an increasing lifeline for a second chance, to re-establish financial security.

“I expect to see more of this going forward given the dynamics – you can imagine a lot of people, particularly if you bought in the last few years, all those people who bought in 2021, their house prices may be down. If the relationship breaks up you may not have that big a pot of equity.”

He said financial pressure from falling house prices could lead to relationship failures, too.

“You can almost imagine that, over the next few years, people who bought at the peak – the stress of that, and keeping up with mortgages, income pressures may lead to relationship breakdown. They may find outside KiwiSaver they may not have many liquid assets and they’re starting back from ground zero.”

He said the process to apply for a second-chance withdrawal was easier than applying for a withdrawal on hardship grounds.

Financial coach Shula Newland said the biggest issue for most people was the need not to have withdrawn their KiwiSaver money previously.

“If you’ve already withdrawn once you don’t get to do it again. It’s more for people who’ve owned houses before and haven’t used KiwiSaver.”

She said KiwiSaver rules could be tweaked for separation situations because a lot of people who split up found it hard to get back into the housing market on their own.

- RNZ

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