KiwiSaver: Owning land stops eligibility

My husband and I have both been saving into KiwiSaver for our first home. However, when we applied to withdraw our money we were turned down as my husband owns a small block of land. This was given to him years ago by his grandmother. The land is not worth much as it has no road access, but eventually we would like to put in road access and build a house. However, without our KiwiSaver savings we can't afford to do this. Do we have to sell the land, before we can buy a property using our KiwiSaver? The land has sentimental value as it is the last part of a larger farm that his family used to own.

You are not the first to discover that ownership of land means that you are not eligible to make a First Home withdrawal from your KiwiSaver account.

This has tripped up many hopeful applicants before you, and no doubt will continue to do so.

Any KiwiSaver member who is already listed as a property owner on a Certificate of Title is not eligible for the KiwiSaver First Home benefits.

A previous property owner can make application to Housing NZ for consideration in special circumstances, but not a current owner.

If your husband sells the property he can apply to access his KiwiSaver under Housing New Zealand's Second Chance option, as a previous owner of property, and he can also apply for the HomeStart grant if he thinks he may qualify.

Readers should go to the Housing New Zealand website for the eligibility criteria.

What about you? It sounds like this property is in your husband's name alone.

If you are not an existing or previous home owner yourself, then you should be eligible to make a First Home withdrawal from your KiwiSaver (such members can withdraw all but $1000 of their savings). It would be worth clarifying this with your fund manager.

The Government is keen to encourage home ownership. Home ownership in New Zealand has been declining since the 1950s and the Government would like to reverse this trend.

Home ownership creates more stable communities and better outcomes for children.

It also encourages a sense of community and participation in community activities.

While the KiwiSaver rules for buying a property don't make it easy for everyone, it is an option that is not readily available in other countries.

In Australia, for instance, there is no facility for a first home purchase using Australian Super.

Selling the block of land, perhaps to another family member, is one option for you.

You could then use your KiwiSaver to buy a modest first home (assuming your husband qualifies as a Second Chance applicant through Housing New Zealand).

Under current rules, eligible members can withdraw all but $1000 for this.

This would get you on the property ladder - not an easy step for most people (hence the government assistance through KiwiSaver and the HomeStart grant).

In years to come you may be able to buy back the family land and then proceed with your plans to build there.

Buying a home under any circumstances is a big financial commitment that requires careful planning.

I strongly recommend that you get legal advice before making any decisions.

- Shelley Hanna is an authorised financial adviser FSP12241. Her free disclosure statement is available on request by calling 06 870 3838 or go to www.peak.net.nz. The information in this article is general and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz