KiwiSaver tapped for home deposits

Rotorua was lucky that it had houses available for first-home buyers at reasonable prices. Photo / Thinkstock

The loss of the $1000 Government start-up incentive to the national savings scheme will hurt those who need it the most, Kim Fulton reports in the third part of our five-week investigation into getting a foothold on the property ladder.

A rising number of Rotorua people are using KiwiSaver funds to buy their first home and a local real estate leader says even more should follow suit as there is an ample supply of reasonably priced houses.

According to Inland Revenue, 166 Rotorua people made KiwiSaver withdrawals for a first home between the beginning of July last year and the end of April this year. Those withdrawals were worth more than $2.7 million.

In the previous year to July, 156 Rotorua locals withdrew more than $1.8 million for their first homes.

District forum leader for the Real Estate Institute in Rotorua, Ian McDowell, said there had been an increase in locals using KiwiSaver funds to get into their first home. The increase hadn't been dramatic, however.

People were aware they could use their KiwiSaver funds but the process could be complicated. Mortgage brokers were working through the process with potential buyers.

Rotorua was lucky in that it had houses available for first-home buyers at reasonable prices.

"There is a good variety of suitable properties for them to buy," said Mr McDowell.

Most of those keen to buy a first home using the KiwiSaver funds were able to do so.

He saw KiwiSaver as a good initiative for first-home buyers.

Nationally, 3759 New Zealanders used KiwiSaver to buy their first home between last July and this April. They withdrew more than $57.5 million. In the previous year to July, more than 3875 New Zealanders withdrew more than $48.6 million for first homes.

Inland Revenue noted schemes had provided the withdrawal data and it might not include 100 per cent of withdrawals.

A family budgeting service head said she was surprised at how many of the service's clients have KiwiSaver accounts but many still weren't in a position to buy a house.

Family Budgeting Services chief executive Raewyn Fox said the service considered KiwiSaver as an option for people getting into their first home but many clients had to tackle debt before they could think about buying.

"We're surprised how many of the customers that come to see us have KiwiSaver accounts."

Those clients were thinking about home ownership and retirement, she said.

Increasing numbers of people, particularly in Auckland and Christchurch, were paying so much in rent they had little hope of saving money.

"So the KiwiSaver deposit could be a lifesaver for them but it's sometimes not quite enough."

The service helped those people to look at their options, first working to get their debts to a manageable stage.

"It's sort of down the track that we can help people start getting ahead a bit," said Ms Fox.

The service was upset at the Government's recent decision to remove the $1000 KiwiSaver start-up incentive. The clients the service dealt with were the ones who needed it most. It was too early to know whether it would prevent people from signing up for KiwiSaver.

She said the service came across a lot of people who were trying to get money out of KiwiSaver having struck hardship.

"That's the nature of the clients that we see."