The amount of money first home buyers are withdrawing from their KiwiSaver accounts is growing exponentially, as KiwiSaver balances stack up and become an increasingly vital part of buying a home.
First home buyers withdrew $44 million from their KiwiSaver accounts in March; exactly double the amount that was withdrawn in March 2015, and more than three times the amount that was withdrawn in 2014.
ANZ, New Zealand’s largest KiwiSaver provider which has a market share of 26%, says the number of first home withdrawals from its scheme has increased by 188% over the past three years.
Its KiwiSaver members withdrew $148 million for their first homes in the year to March, up from $62 million in the previous year.
“As KiwiSaver balances grow, more people are taking advantage of the option to withdraw some or all of their money to help buy a new home,” says ANZ’s managing director of retail and business banking and wealth, John Body.
“The average first home withdrawal by our customers last year was $18,361, compared with $10,611 in 2013.”
The Government’s KiwiSaver rules enable people to withdraw their KiwiSaver money to help fund the deposit on their first homes (excluding the Government’s $1000 kickstart and any savings transferred from an Australian super fund).
The Government also offers KiwiSaver HomeStart grants of up to $5000 for those who’d like to buy existing homes, and $10,000 for those who’d like to build their own homes.
“For instance you need to have been a member of KiwiSaver for at least three years before you can make a first home withdrawal,” he says.
KiwiSaver members wanting to apply for a HomeStart grant also need to regularly contribute at least 3% of their income to KiwiSaver.
“But you really make the most of this benefit when you have been contributing for five years because the Government will potentially give you $1000 for each year you have been contributing, up to a maximum of $5000 per person ($10,000 per couple),” says Body.
“You can double that if you are looking to build your first home (subject to conditions on the purchase price of homes and income of buyers).”
Speaking to Interest.co.nz in March, the Retirement Commissioner Diane Maxwell, encouraged New Zealanders to use their KiwiSaver to help fund their first homes.
She says paying down a mortgage encourages people to put money toward a valuable asset, rather than blowing it on things they don’t need.
She maintains getting on the property ladder is “the single best thing you can do for your retirement”.
Body encourages people to resume contributions to KiwiSaver after making a first home withdrawal: “A first home withdrawal can make a big dent to the total amount of money you have when you retire.
“It makes sense to resume contributions as soon as possible and consider increasing your contribution rate to ensure you catch up and achieve your retirement savings goal.
“This will ensure that saving for a comfortable retirement and owning your own home work hand in hand.”