Why we should make it easier for first home buyers to raid their KiwiSavers

Jenée Tibshraeny argues first home buyers should be able to withdraw their KiwiSaver funds to buy investment properties

28th Jul 19, 6:31am by Jenée Tibshraeny

By Jenée Tibshraeny

Should we be concerned that KiwiSaver can legitimately be nicknamed KiwiRaider, as the value of withdrawals for first home purchases increases?

My colleague David Hargreaves last week argued yes.

I would not only like to argue no, but add that the law should be changed to make it even easier for first home buyers to withdraw their KiwiSaver funds (sorry David).

Under the KiwiSaver Act 2006 an eligible member can only make a withdrawal for a first home if “the land is, or is intended to be, the principal place of residence for the member or for the member and members of the member’s family”.

This "intention" is something a KiwiSaver member has to prove to their provider, usually by committing to living in the house for six to 12 months.

So, a member can’t use their KiwiSaver to buy an investment property.

Sure, the premise of KiwiSaver isn’t to help members on to the property ladder. It’s to encourage people to save for their retirement.

However the rules essentially tell members: ‘You can save for your retirement through investing in equities, property, bonds and cash through managed funds, or you can invest directly in a property (if you haven’t already owned a property in the past), but you have to intend to live in that property.’

Property isn’t treated the same as other asset classes. It isn’t even treated as an asset. It’s treated as something you need to put a roof over your head.

But the reality is that property is an asset class.

What's more, it's (unfortunately) an asset class that receives favourable tax treatment, has historically sky-rocketed in value and is the thing banks are willingly to lend against if you'd like to set up a business, for example.

Many New Zealanders have property to thank for putting them in a better position at retirement.

It is no secret that owning a house, preferably mortgage-free, at retirement is favourable to renting. It is also no secret that getting on the property ladder is the hard part. Once you’re on, the chances of reaching retirement a homeowner are much higher.

So why then should those who have never enjoyed the benefits of property ownership face an impediment if they believe investing in property will provide them with financial security?

The KiwiSaver rules should say: ‘First home buyers can invest their KiwiSaver in managed funds or property. Full stop.’

David, in his piece, pointed to concerns raised by KPMG’s head of banking and finance John Kensington that young New Zealanders withdrawing their KiwiSavers for first home deposits was “pushing the problem of retirement affordability down the track to future generations”.

David also questioned whether the increase in first home buyer activity, supported by KiwiSaver withdrawals, was artificially raising house prices.

And he made the point that there was a risk that if the housing market went bust, people who would otherwise be more insulated by having a diversified investment through KiwiSaver, would be knocked back along with other property owners.

It's difficult for this not to turn into an intergenerational debate at this point.

The generation that’s benefited tremendously from property investment, at the expense of the younger generation that’s about to fund their retirement, should surely not try to pull the ladder even further up from beneath them.

I am not saying people should withdraw their KiwiSaver for a first home.

What I am saying is that they should be given the opportunity to, without being required to live in the house.

Why? Cities attract young people. This is where many of the jobs and opportunities are. Cities are also where housing is most unaffordable.

Wouldn’t it be great if city dwellers could invest in property in parts of the country they could actually afford, with the intension of perhaps moving there at a later stage of their lives, or benefiting from rental yields?

Contributing towards a mortgage would also encourage them to exercise discipline with their finances.

Before people start freaking out over this hiking prices in the provinces or encouraging more of what New Zealand doesn't need - people buying and selling houses off each other - stop and have a think about how much power the non-property-owning class in New Zealand has.

Not much.

The Commission for Financial Capability is looking at this issue as a part of its three-yearly review of the country’s retirement income policies currently underway.

Commerce and Consumer Affairs Minister Kris Faafoi indicated to interest.co.nz he didn’t have a strong personal view on the matter.

Letting first home buyers use their KiwiSaver to access property in the same way they can other asset classes as they save and invest for their retirements wouldn't be a game-changer for the economy.

It would simply give first home buyers more options and go a tiny way to helping improve intergenerational inequality.

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98 Comments

by Lapun | 28th Jul 19, 6:54am 1564253685

The argument seems to be: let Kiwisavers buy investment property if they are 'affordable' and outside the city. So a sort of KiwiBach policy.

by Uninterested | 28th Jul 19, 7:31am 1564255912

To buy a house in a place where the investor does not want to live in at the moment is a bit of a gamble.
Personally I think that the best reason to allow withdrawals like this from Kiwisaver is that for these people it will make their balance at retirement correspondingly lower. Which would reduce the financial penalty to those people if a future govt means tests Kiwisaver for their pension entitlement.
The down side is that it will be making house prices a little bit higher right now given that investors are reducing their purchases.

by Toppertee | 28th Jul 19, 9:04am 1564261498

To buy overpriced properties in the arse end of nowhere just because that’s the only place they can afford a deposit to keep the bankers debt bubble going. Was this advice provided by the bankers association?

by Averageman | 28th Jul 19, 11:05am 1564268722

Well put.

by RickStrauss | 28th Jul 19, 2:24pm 1564280677

I think this advice might work if New Zealand was not mismanaging and hampering supply of housing so much compared to in the past. Basically leverage and a more natural price inflation would play out over time. In the current environment it's simply going to be capitalised into higher prices, forcing more younger folk to pay more for housing.

A better result for younger generations of Kiwis would be had by working on making housing more affordable, as was done for earlier generations in efforts to boost the supply of housing.

by CSE4 | 30th Jul 19, 12:49pm 1564447783

Ridiculous comment actually.

by Toppertee | 28th Jul 19, 9:08am 1564261699

Inter generational equality improves the minute that millennials stop listening to the bank sponsored media and baby boomers. The bubble only stays alive by trapping the young. Without them increasing the level of household debt in the economy the whole thing falls over. Keep your funds in KiwiSaver, invest offshore and wait for the collapse of the NZ dollar would be alternative advice to buying a shed in Dannevirke or Whanganui..

by Te Kooti | 28th Jul 19, 1:22pm 1564276936

by J.C. | 28th Jul 19, 1:03pm 1564275789

Yes. I think Jenée's opinion piece misses this very crucial point. Private debt is the key and the millennials are shouldered with taking on some of the the greatest debt in history to participate as a kind of marginal buyer of overpriced assets driven by the greatest credit boom ever (enabled by a banking system that is granted the ability to create mortgages without any corresponding capital earned by human labor).

Not sure keeping one's funds in KiwiSaver is the answer though. Typically the only way KS generates returns in these markets is through unrealistic capital gains and ROE. I mean when NZX50 and ASX225 appreociate 20% in 7 months and nobody bats an eyelid, something's definitely up. Where else are people going to invest? USD? The EU? Emerging market?

And then there's gold. But those who invest in gold are ultimately protesting against the madness of uncontrolled finacialization of the economy. These kind of people don't really believe in things like Kiwisaver or the NZ property miracle.

by Laminar | 28th Jul 19, 6:32pm 1564295551

Banks must maintain capital adequacy ratios and in that sense they cannot extend a loan without some corresponding previously 'earnt' capital (excepting the fact that they can borrow capital, in which case someone is still putting up the goods, so to say).

by Toppertee | 28th Jul 19, 7:39pm 1564299548

That’s very old thinking about how banking works.

by Laminar | 29th Jul 19, 3:13pm 1564370020

No its simply correct. You evidently dont know the difference between bank capital adequacy and bank reserves.

by Audaxes | 28th Jul 19, 9:28am 1564262901

If more investors are chasing houses I guess prices will rise - hence the accommodation supplement payments will as well with more renters unable to pay as less money is invested in the productive side of the economy. No doubt banks will see this as an opportunity to lend more to the unproductive sector due to KiwiSaver underwriting their risks.

The Quantity Theory of Credit presented by Richard Werner (Werner R. A., 1997; Werner R. A., 2013; Ryan-Collins, Greenham, Werner, & Jackson, 2011, pp. 109 - 110; Werner R. A., 2005, p. 226) proposes that the impact of bank lending for GDP transactions will depend on the purpose of lending. If lending is directed towards consumer credit that increases consumption, there is likely to be an increase in consumer price inflation as a consequence of increasing aggregate demand relative to the aggregate supply of products. Whilst bank lending for business investment to private non-financial corporations and unincorporated businesses encourages growth in economic activity. Investment that increases output of goods and services included in GDP transactions suppresses inflationary pressures in the economy, as a consequence of increased production of goods and services, and also raises the incomes of factors of production. However, only 15.5% of lending by financial institutions is being directed towards investment by non-financial firms and unincorporated businesses...

The Quantity Theory of Credit proposes that increasing the allocation of credit money for non-GDP transactions (transactions that do not increase GDP (gross domestic product)) will have no impact on economic growth, and will instead promote asset price inflation (Lyonnet & Werner, 2012, p. 95; Werner R. A., 2005). Credit growth for non-GDP transactions must be increasing, if total credit growth exceeds GDP growth (Werner R. A., 2013, p. 366). When lending for non-GDP transactions grows faster than the growth in GDP transactions it can produce asset price bubbles that create the potential for a future financial crisis. Non-GDP transactions are associated with the purchase of existing financial (for example, bonds, shares, and derivatives) and property assets that are sold in secondary markets. Secondary markets transact products previously sold within markets, such as previously issued financial assets (for example, company shares, bonds, and derivatives), and the transfer of ownership of property that has previously been purchased. Whilst primary markets trade newly created financial assets (for example, initial placing of shares by companies, rights issues of shares, and newly issued bonds) and the sale of new properties. The majority of financial and property assets are being resold, and so are traded within secondary markets. Link

by PocketAces | 28th Jul 19, 9:32am 1564263138

No, absolutely not, we should NOT allow fhb's to use kiwisaver to buy investment properties. I don't think I have heard much that is crazier, we already have a situation where every man and his dog is trying to become a landlord, now you want every man, his dog and its bone to do it.
This is not even looking in the right direction to solve the issue of unaffordable housing where people need to live for work. Just shoving the problem further down the food chain is not a solution, you simply shift the unaffordability to somewhere where it might not have been such an issue.
Please go back to the drawing board and try to come up with something that might actually work.

by JohnTrz | 28th Jul 19, 11:05am 1564268759

Is Jenée Tibshraeny having a weekend joke? If not, this is the most antisocial column I've read by an interest.co.nz staffer.

by J.C. | 28th Jul 19, 1:07pm 1564276033

Nope. Jenée is an agile and balanced thinker. She's playing the devil's advocate role or even trolling.

by DaveB1978 | 29th Jul 19, 8:09am 1564344565

Should let people buy one house with KIwiSaver funds. Doesn’t matter what the purpose is. If someone chooses to rent an appartment in the city but own an rent out a house in the suburbs somewhere, they shouldn’t be penalised.

by Hardly | 28th Jul 19, 9:45am 1564263918

I appreciate the devils advocate position but this is such a bad idea.

• First of all, we already have enough leveraged property investment that it is a problem.
• Second, the purpose of KiwiSaver is long term diversified investment, not highly leveraged, single asset class, single region.
• Third, one of the benefits of KiwiSaver is people actually pay tax unlike specuvestors.
• Fourth, New Zealanders are already massively overexposed to property through owning their own home.
• Fifth, how are you going to manage people wanting to ‘withdraw’ their property that is notionally in KiwiSaver.

This idea is predicated on the view that property is a great investment, people are missing out because they can’t invest in property, why won’t you let kiwis experience more of the windfall gains of property.

Instead of wrecking KiwiSaver, we need to be educating New Zealanders on the benefits of diversification in their investments. The S&P 500 is up by a factor of 9 since 1990. Peddling the myth that property is the safest and highest performing asset class is brainwashing New Zealanders into blindly investing into a national Ponzi scheme.

What you are proposing here is that someone buy a ‘investment’ property in Levin with say 80% leverage. Not only will their entire retirement savings be dependent on the Levin property market. But, they will also have the potential to lose 5 times their investment through leverage.

Keep in mind I posted on David’s article saying people should be allowed to continue to withdraw for a first home and I noted the policy rationale for this.

We need to leave KiwiSaver alone. Why not focus your attention on how to get it from a 3% employee/3% employer scheme to a 5%/7%. And maybe we cut the tax rate for KiwiSaver. Maybe we put the government credit back up to $1000 per year. And definitely we should be making it compulsory. What we need is every New Zealander in KiwiSaver and what we need is them in diversified portfolios until they are 65. If people want to invest in a fund with property exposure, all power to them.

by imhenry | 29th Jul 19, 7:47am 1564343239

Hardly, I am with you, Time Kiwisaver was left alone to let do what it was intended to do provide for peoples lifestyles in retirement, not a gaming machine for Politicians,Media people and Financial Wizards.

by DaveB1978 | 29th Jul 19, 8:11am 1564344661

KiwiSaver is designed to help people create wealth for retirement. Property investments are a way of doing that.

by PocketAces | 29th Jul 19, 9:17am 1564348672

Yeah, but you need to deny others the same in order to do it, unless you are advocating for continuing massively high immigration to provide all the tenants for all these new landlords

by Nzdan | 29th Jul 19, 12:11pm 1564359119

Why don't we all become landlords? Rent houses to each other. Nobody would need to work.

by PocketAces | 29th Jul 19, 1:17pm 1564363021

That seems to be the idea

by Kirsty | 29th Jul 19, 8:22am 1564345372

Sorry, but I disagree with the compulsory nature of Kiwisaver. Hubby and I have a mortgage, paying that off at a faster rate than the minimum $ amount is giving us more bang for our buck than having money invested in a scheme that we can't touch nor can we control when it crashes. If we were forced into Kiwisaver then our $ would be going to the most ultraconservative cash fund I could find - I want return of my money, not a return on it - we are risk averse in a major way.

You wait until there is GFC version 2, merely a matter of time really, then you try explaining to all those in Kiwisaver why their savings have gone poof into thin air. How many actually realise that their funds are not government guaranteed, that the returns are now negative due to fees, and that the retirement they thought they might have is gone.

(I watched my parents lose it all in the two years following the 87 sharemarket crash, and they had no money in it. They lost the businesses and the house sold for just enough to pay the mortgage off and give enough $$ to head south for a new life. They never went bankrupt, they paid all that business debt off. 1987 was not just a sharemarket event, it hit main street hard in our region. Am I burnt by that, hell yes. You guys want to play Russian roulette with imaginary gains on a rigged sharemaket then go for it - but some of us live in the real world of needing $ now to pay for life now, not at some imaginary date in the future. As my Nana used to say: if you can afford to take that $100 note and burn it, then you can afford to play on the sharemarket.)

by Sluggy | 29th Jul 19, 10:31am 1564353093

"You guys want to play Russian roulette with imaginary gains on a rigged sharemaket then go for it "

And what happens if the housing market is similarly rigged ? Personally I think it might be, it surely doesnt make any sense when I look at a 3 brm timber dogbox on 400m2 and its "worth" $1m . The fundamentals are so out of whack its not funny.

by Kirsty | 29th Jul 19, 10:54am 1564354481

Oh I agree, the property market is completely out of whack with the fundamentals. Every asset that could be found worldwide was loaded up due to QE money looking for a return....eventually that will collapse as no more assets can be found. Do we go back to tulips?

Personally, we could take a 50% housing market correction and still have equity to burn. Like shares, you're only screwed if you have to sell for some reason. With such low interest rates anyone who loads up with debt to gamble in any market deserves the consequences - I have zero sympathy for them. I look at such low interest rates with horror as they signal that the economic environment (main street and otherwise) is screwed and on life support - hence I'll grab those low interest rates with both hands and increase our mortgage payments to make hay whilst the sun shines. I look around at main street (the empty shops, the never ending for rent/lease signs popping up, the number of people outside my circle of family and friends stating how difficult they're finding it financially) and have an immediate reaction to hunker down. I remember 87, I remember what the feel was beforehand and what it was like afterwards. I can remember on the news a story about NZ tipping into recession again in the early 90s.....my first thought was "when did we come out of 87?". The region I grew up in didn't recover until the late 90s.

We're in hunker down mode, and have been for the past year or so. Cash maybe king (in terms of picking up the inevitable bargains that will eventuate), but being out of debt is even better.

by JimmyJames | 28th Jul 19, 9:56am 1564264619

As with any Ponzi remedy or argument you run out of road. If a young person is using their KiwiSaver to buy a house on the outskirts of a city or in a the regions while they rent in the city where then does the second young person who is renting off the first young person buy their investment property. You just run out of outskirts, you run out regions, you run out of road. PONZI.

by CSE4 | 30th Jul 19, 12:57pm 1564448235

No... it's called market supply and demand. It sorts out the prices of houses and rents. It's not hard. Allowing savers to use the funds for either PPR or rental makes no difference to the market when all's said and done, prices move and it's all sorted. But I think many commenters on here forget that and cry foul and try to make up complex reasons that will cause things to occur.

by tim52 | 28th Jul 19, 10:00am 1564264822

The non-property-owning class in NZ has no power because the demographic has low voter turn out, making it difficult for politicians to care about them.
Most of the boomers have yet to fully benefit from their property price gains as they are waiting for retirement to cash out. When the younger commits to spend the next 20 - 30 years of their life paying back the property value the only thing guaranteed is they just paid for the older generations retirement.
I don't believe the past 30 years of property prices gains are indicative of next 30 years. The massive property capital gains are either going to stop during the next 10 year cycle or most likely have already stopped as NZers don't have enough working years to save the deposit and repay the principle regardless if interest rates.
If you think the NZ property sector is going to continue to continue to preform their are plenty to kiwi saver options to look at (i have seen really good peek returns) but letting someone who has been unable to save a deposit outside of kiwi-saver (possibly living paycheck to paycheck) buy a house in another city and rent it out and manage the maintenance and costs without any hard guarantee of large capital gains to bail them out if they get it wrong will a disaster for many leaving them with a debt to pay off rather than having a small nest-egg. I think kiwi saver should remain somewhat idiot proof.

by THE MAN 2 | 28th Jul 19, 10:25am 1564266312

No, not a great idea as so many people that buy property as investments are not very good landlords.
With the negatively geared property losses now ringfenced it could leave many vulnerable.

by Due Diligence | 28th Jul 19, 10:57am 1564268239

In addition to tax ring-fencing, some of the changes to the Residential Tenancies Act that this government is going to be pushing could pull the rug out from small-time landlords. E.g making it incredibly difficult to evict tenants that are on periodic agreements, even if they are causing all sorts of grief. And the upcoming healthy homes requirements (namely heating & ventilation) will likely be more costly than this year’s insulation requirements. I agree that these are a good idea, but for some landlords achieving compliance will be more onerous than anticipated. And even though CGT is off the cards for now, there are some very extremist tax ideas out there from the likes TOP that would push many landlords out of the market.

And of course, none of this would have any impact on rental prices (sarcasm).

All this said, I’d still recommend property as a good investment for anyone prepared to stick with it for the long term and put in the work. As times get tougher for landlords the supply curve will shift to the left and rental yield will increase significantly.

by Glitzy | 28th Jul 19, 9:13pm 1564305227

Good Lord, as if there isn't a big enough concentration risk in Kiwis investing in residential property already.

And you are suggesting actively encouraging amateur investors to buy property in the boonies where they can't manage the property themselves, where they have no idea about rents and where if they choose to sell they may be stuck with the place for months if not years.

Craziest idea of the year.

Perhaps you can also plays devil's advocate and argue for legalisation of crystal meth ? I haven't tried it but those who use it say the buzz is unreal.

by Gummy Bear Hero | 28th Jul 19, 10:56am 1564268208

... I agree .. Kiwi saver was a nasty idea , a silly diversion from proper investing , which as everyone knows is houses ... there is nothing else in Gods green acre worth a look than the Kiwi home ... forget business , or anything at all overseas : every penny owned and borrowed ought to be piled into bricks and mortar ...

.. you can't lose with houses : true then , now , and forever. .

by printer8 | 28th Jul 19, 11:29am 1564270159

I strongly argued that David's comments were most definetly strongly in the fund mamagers interest rather than the individaul's. On a 1 (strongly disagree) to 10 (totally support), I would have given David a negative 10.
Jenee, I give your arguement a 7.5 as having a little bit of merit.
To me, KiwiSaver is about promoting a responsible savings habit rather than a total spend, spend habit. For a young couple with a young family on the way but without a home, retirement is most very much definetly a secondary consideration.
I think that Jenee's proposal has some merit worht investigating. Under some circumstances buying a investment property has merit. For example, if someone proposes travelling overseas to work for a year or two and to protect one's self against going backwards in the event of property boom having a rental property could be a sound investment. I have known people who have sold their home, gone overseas for a year or two, and to return to find that properties have moved to an extent that they have not been able to afford a home again. Whiel this is about people who have previously owned a home, the same pronciple applies to FHB.
And before the DGM get in about the falling property market - then it is an individual decsion that one lives with the consequences. However, property has tended to out perfoem term deposits for as long as I can remeber.
For me, I would rather the security of knowing that whatever the property market did, I would be able to afford a house again.

by Due Diligence | 28th Jul 19, 11:38am 1564270739

My first property purchase was a rental. Was young and too poor to live in it myself at the time. Best decision I ever made.

Many first home buyers get flatmates in to help pay the mortgage. They could use their KiwiSaver to fund this purchase. Would it really be so different if they were to rent out 100% of their first home to tenants instead of 75% of their first home to flatmates? I don’t think so.

by Noncents | 28th Jul 19, 11:46am 1564271201

Thanks for the article. I actually agree with most of it.

Kiwisaver is meant to be for retirement. I see nothing wrong with allowing withdrawals for a house. It is a fundamental necessity, and one of the most useful assets to have at retirement.

Without these FHB withdrawals, all Kiwisaver would be is a giant rent fund to pay the $1000 or so a week, a small unit will cost in 50 years time.

by Te Kooti | 28th Jul 19, 1:23pm 1564277015

The more comments berating this as a bad idea, the more I like it.

by THE MAN 2 | 28th Jul 19, 2:35pm 1564281308

The best thing about KiwiSaver is the contribution from your employer and the government small handout each year.
The returns on the investment isn’t staggering but it is compulsory saving.
Personally have not got a KiwiSaver account as I work for myself and don’t need one As returns on our property portfolio makes KiwiSaver returns pretty average really.
The only thing that worries me about KiwiSaver is that there will be a major downturn or two with the sharemarket which will reduce balances substantially in the future, whereas house prices will continue to increase.

by Te Kooti | 28th Jul 19, 4:33pm 1564288422

Far better to take control of your financial destiny than outsource it to mediocre overpaid fund managers. Several ETF's, a few infrastructure funds/stocks and property. Yes you have to take some risk, you can't expect to get ahead without doing so.

by RickStrauss | 29th Jul 19, 9:10am 1564348207

On the other hand, the mix you espouse is exactly what Kiwisaver can provide a part of - via low fee schemes such as Simplicity that don't overcharge to the extent the coddled banks and fund managers in NZ do.

by Basel Brush III | 28th Jul 19, 2:07pm 1564279647

I believe that the Australians may invest their Super funds into property, often interest only loan supported at some risk as they have found.
I presume that any liquidation of the asset must result in the cash being recaptured by the Super funding and not used unless the investor has reached the age that allows withdrawals.
I stand to correction by anybody who knows.
In a same case situation here the interest in doing this may have a lot less appeal than first thoughts suggest.

by Gummy Bear Hero | 28th Jul 19, 2:12pm 1564279933

However you look at it , government diddling around in the housing market - whether it be Kiwibuild , or Kiwisaver , accommodation supplements , whatever - it still 100 % misses the elephant in the room : land prices are utterly ridiculous and unaffordable.

... section prices rose 900 % across Orc Land in the past 20 years...

Why ? . . and what to do about it . .. rectify the stupefying price of land ... and voila , affordability problem solved ... no need to raid the retirement funds.

by Houseworks | 28th Jul 19, 8:57pm 1564304241

I would say 400 percent not 900

by brisket | 28th Jul 19, 3:08pm 1564283287

In the abstract, maybe. Why should res. property be treated differently from other asset classes?
But in real life: an absolute stinker of an idea. Paying interest on a Woodville meth lab is not saving, and it is certainly not a policy that will help move our economy away from its utterly myopic property fetish.

KS was never 'just' about saving for retirement, anyway. It's not as if we needed any encouragement to invest in RE. A big part of the whole idea was that - as has been pointed out by everyone from the reprobate Don Brash to the Green Party - we collectively need to invest in something other than real estate. Companies. Commodities. Magic beans. Anything.

by THE MAN 2 | 28th Jul 19, 4:00pm 1564286402

What commodities would you invest in?
What company is guaranteed that you can get a return that beats a well bought positively geared property, with no deposit required?.

by J.C. | 28th Jul 19, 4:14pm 1564287269

What company is guaranteed that you can get a return that beats a well bought positively geared property, with no deposit required?.

ANZ, Westpac. Do you not get the irony of this? The same companies that provide the fuel (through their own alchemy) for the beloved property market. Similar behavior as in Japan in the 80s.

by THE MAN 2 | 28th Jul 19, 4:57pm 1564289825

JC, you didn’t read my question!
You need money to invest in ANZ and Westpac!
I can buy positively geared property that gives a great income and capital gain and put no money in, that is why property is unbeatable.

by PocketAces | 28th Jul 19, 5:32pm 1564291930

And why it should be made far more difficult for investors to buy, and way easier for owner occupiers

by Grant | 28th Jul 19, 4:48pm 1564289304

It is possible to pull a large portion of ones super to buy investment property.

by Yvil | 28th Jul 19, 5:04pm 1564290262

Great to read opposing views within Interest and great to see them formulated with respect (many commenters could learn from it).
I'm in the camp who thinks it's NOT a good idea to use KS for an investment property especially if said property is located far away form where the owner lives. Property investment is not passive, you need to actively manage the house, the tenants etc… it requires skill and reasonably frequent visits to the house. I'm afraid some new landlords would find out owning an investment house and dealing with tenants is a lot harder than they thought. They may then sell said investment house and nothing would stop them from spending the money and not saving it for retirement.

by KH | 28th Jul 19, 5:39pm 1564292360

No no no Jenee. I can accept withdrawals for for first home, but only just. But nothing else.
Kiwisaver should only be part of your assets anyway. You should have an untouched Kiwisaver, AND, anything else you can assemble.
Your Kiwisaver value doesn't just protect you, it protects others in that the staye doesnot have to provide for you.

by Houseworks | 28th Jul 19, 8:44pm 1564303491

"Your Kiwisaver value ... protects others in that the staye [state] doesnot have to provide for you."
Who's kiwisaver?? Your kiwisaver or the government kiwisaver they were nice enough to allow you to put in your name and count as your own? According to KH those who save and scrimp should be consequenced later. Stuff that! The foresight of those who save should be the cherry on top and not for the staye [state] to take an even bigger slice. You are welcome KH to hand over your hard won savings and voluntarily live in poverty

by KH | 29th Jul 19, 8:36pm 1564389370

You might have to explain your points some more Houseworks. I can't follow anything much you say there

by Houseworks | 29th Jul 19, 8:46pm 1564389964

Kh yes its very hard to follow your original post with all the spelling and grammatical mistakes

by Retired-Poppy | 28th Jul 19, 6:14pm 1564294446

I am for FHB's using their Kiwisavers to purchase homes, but not at these price to income ratios and certainly not for investment purposes. Houses at stratospheric prices represent only serious risk and don't constitute responsible investing in my view.

by THE MAN 2 | 28th Jul 19, 7:46pm 1564300008

So property prices that return a positive income and capital gain, you don’t agree with Poppy?

by Retired-Poppy | 28th Jul 19, 9:31pm 1564306268

... are you yet another vacuous Spruiker that guarantees this outcome from the current standpoint?

.... que the back peddling.

REA-TTP has already been caught out implying the very same thing. What is it with you people lol!

by Somebloke | 28th Jul 19, 7:16pm 1564298209

https://www.visualcapitalist.com/mapped-the-countries-with-the-highest-…
Lets set up a FHB Kiwisaver withdrawal ATM at SkyCity too.

by Houseworks | 28th Jul 19, 7:44pm 1564299872

Fhb already are accessing their kiwisaver accounts for their home which only requires 6 mth commitment as a principal place of residence. Thats not a very high barrier so I dont see any need to make access a whole lot easier. Its better to take the natural progression of first home first and then leverage a residential investment property then a bigger multi-unit residential investment property then a block of shops then an office building etc. all self managed and strongly growing in capital value. Then retire worry free and withdraw the tens of thousands balance of kiwisaver which by then is a pittance compared to the property portfolio!

by brisket | 28th Jul 19, 9:25pm 1564305957

can we use Kiwisaver to invest in cryptocurrency? It's an investment, right?
can we put it on the horses?
can we spend it on plastic surgery to further our Instagram career?
madness

by Foreign buyer | 28th Jul 19, 9:49pm 1564307380

These spruikers are not only ruining FHB's present but they are now trying to destroy their futures also, and for what! Pure selfish greed! Think about other people for once please...

by Houseworks | 29th Jul 19, 6:20am 1564338006

Not so. Some investors like those in chch are buying unwanted and damaged properties cheaply but have to spend time and money reinstating them. Anyone could do the same but very very few people want to (for evidence read retired poppys comments everywhere). But those hardworking investors are bringing properties back to life because they want to earn a return and in the process they are helping nz. If you have a problem with that, it's your problem. You told us recently that you owned a property portfolio but sold up, presumably making a killing. Strange you are now pointing the bone at other genuine investors.

by The_4th_estate | 28th Jul 19, 11:09pm 1564312193

Cancel the accomodation supplement and see how attractive investing in rentals is then! I think we need to be MORE LIKE CHINA on this matter and say one house only per person or family unit and thats it. Go invest across other asset classes or gasp horror...start a productive business...but that will take some skills many housing investors don't really have...

by Houseworks | 29th Jul 19, 6:17am 1564337879

Go ahead and cancel the AS. Like I have said here before, it gives tenants extra cash they spend on stuff they don't need. My tenant put it to buying a brand new vehicle when a good reliable secondhand car would be fine but obviously not so flashy to show to friends. As for owning one house each there are thousands of properties that have multiple houses/units on one piece of land and only one title. Tell the wise political masters to allow these properties to be divided. So cancel AS as far as I am concerned, but you can que the screaming now from every sector of nz

by Retired-Poppy | 29th Jul 19, 9:16am 1564348571

Houseworks, try pulling someone else's chain with your tall tales. if your tenant had the cash or sufficient cash/deposit to purchase a new car then it would most likely have precluded them from that entitlement in the first instance.

by Houseworks | 29th Jul 19, 9:38am 1564349931

There will always be people such as yourself who deny the facts rp

by Retired-Poppy | 29th Jul 19, 9:59am 1564351180

... its safe to rebut in this instance. You've yet again been caught making stuff up

by Houseworks | 29th Jul 19, 10:21am 1564352473

Good one rp very funny. Denial and dismissing something out of hand is the way you avoid something you cant handle. Try also putting your fingers in your ears and closing your eyes.

by The_4th_estate | 29th Jul 19, 8:38am 1564346306

You sound like one of my grumpy baby boomer uncles...bigotted, wealthy and out of touch. Clearly you look down on renters thinking of them as a second class citizen in need of your paternalistic offerings. I can't equate your tenant needing the AS yet having the wealth to buy a flashy car (you say that as if you think they should just have a horse and cart...because they are renters?) Is thevAS not dependant on income or am I incorrect on that?

by Retired-Poppy | 29th Jul 19, 9:03am 1564347829

A/supplement is both income and asset tested. Either Houseworks was blissfully unaware of that till just now or he's knowingly harbouring a benefit fraudster...

by RickStrauss | 29th Jul 19, 9:11am 1564348294

Well, he did laugh about not lodging his tenants' bonds a while back here on Interest...

by Retired-Poppy | 29th Jul 19, 9:14am 1564348450

Yes, true that.

by Houseworks | 29th Jul 19, 8:48pm 1564390133

I wasnt laughing then rickstrauss you have no idea. We've sold that place now so we could rightfully be laughing to the bank, but of course we wouldn't dare do that. The tenants have lost their kind landlord (thats me) who kept rents low for them and took good care of the property and grounds. The new one (the new landlord) I would hope has all bonds up to date but has also increased rents skyward. Your twisted thinking would probably say the tenants are better off

by RickStrauss | 30th Jul 19, 9:08am 1564434511

In your original comment you were laughing (i.e. "haha"). I have no idea whether you were crying on the inside, as I cannot see behind the comment.

Pointing out this earlier comment was not to say you're not a benevolent, loving and kind landlord overall.

by Houseworks | 29th Jul 19, 9:42am 1564350143

It's funny but to me you seem grumpy and bigoted. Add to that list envious, bitter and spiteful, after all it was you suggesting the AS should be removed. I would love to see the look on your face when or if that happens.

by Retired-Poppy | 29th Jul 19, 9:58am 1564351117

Yes, Landlords would protest at the steps of Parliament and tenants would stage occupied squats everywhere.

by Houseworks | 29th Jul 19, 10:03am 1564351423

Landlords would not protest retired poppy. You think you know everything despite experiencing very little in life. The roar would come loudest from the tenants losing their free cash flow much like removing a passifier from someone. But if you disagree and you dont like the concept of AS take up a petition to the government demanding its withdrawal. I would love to see that reaction.

by Retired-Poppy | 29th Jul 19, 10:32am 1564353164

a/supplement stopped, tenant can't pay landlord. Yes, Landlord very happy. Landlord reduce rent, tenant still can't pay, Landlord becomes depressed. Landlord tries to sell in falling market, but can't. Yes, it's so incredibly hard for me to comprehend the logic of it all (^o^)

by Houseworks | 29th Jul 19, 10:34am 1564353256

You have no intention of following up your assertions. You and the fourf estate would rather just sit here throwing mud and insults. Says a lot about you

by Retired-Poppy | 29th Jul 19, 11:13am 1564355612

.. why you need to make stuff up is more the point. Mud sticks.

by The_4th_estate | 29th Jul 19, 5:13pm 1564377237

Its not an insult to state a fact and that fact being the AS is a market distortion, if it were removed in true neoliberal fashion then the true price would be realised by good old fashioned market economics...funny how that never applies to rentiers isn't it...

by Houseworks | 29th Jul 19, 8:53pm 1564390419

The government can do virtually anything it wants I think they actually increased the AS amounts paid but I dont know since I've never claimed the AS. All supplements and subsidies could be removed across the board, like including subsidies to doctors and pharmacies

by PocketAces | 30th Jul 19, 7:11am 1564427487

I would like to see the AS having to be applied for by the landlord, after that is who it benefits.

by mikekirk29 | 29th Jul 19, 9:02am 1564347720

1. Savings for retirement are meant to be (in the olden days...) a safe way to make retirement more comfortable when not earning any more.
2. Savings ratio is pathetic because central banks want to encourage all to buy risky assets that go up in value faster than savings.
3. Savings used to be basis for investment in economic theory. In reality, money is created, not shifted form savers to borrowers.
4. A large % of NZ housing stock is severely under-capital invested - ie it is not adequately maintained, insulated, and built out of wood.
5. Investment property as a hedge for retirement is a minority sport which all and sundry seem to want to get into as it is a sure thing, in the lat 25 years, over a 10 year span.
6. Lastly, please consider: more and more retired over 65s, and ratio of them to those (aged 45-65) who will need to buy their houses when they "cash out" (or down-size or go to retirement village etc) is dropping all the time. Logically, if there are fewer and fewer sufficiently well off younger folk to buy houses off older lot, then there will have to be a big drop in prices to be able to offload. Over 65 demographics in Auckland by 2030: this group, according to ARC figures will increase 7 times faster than those aged under 14.
Over 70 year olds hold more of property equity each year because they gained greatly from previous decades of inflation to erode debt (esp in 1972-84) and also favourable tax treatment and no student debt. Investor property nirvana idea is a pipe dream if it is thought this is a solution to inadequate retirement income for more than a small minority.
Some figures being recorded on who owns how many properties ares seldom seen and I imagine this is because they are (as so often with wealth assets in Western societies) not statistically investigated. Why not?
If you are an Agent and have access to Property Guru, you can see how many properties a person owns that they do not live in. In some cases it is 100s. Property investment I am afraid is a scheme by which inequality in society continuously gets worse. In order for it to continue to grow, you need more renters. Rents rise faster than wages.
Money should be earned by proactive and innovative means and influenced by a taxation system to favours work, not rentier-ism.

by Retired-Poppy | 29th Jul 19, 9:39am 1564349974

Excellent comment mikekirk29. Demographics (aging population) is a good reason to assume housing will shake out many a hardened speculator over the longer term. Now with limited room for monetary stimulus to contend with, its foolish to assume prices will once again rise/recover quickly like they've done in the past.

by meh | 29th Jul 19, 1:10pm 1564362638

Wasn't it also possible to save for retirement at the same time as repaying the mortgage in 15 years or less?

by Nzdan | 29th Jul 19, 5:43pm 1564379034

It was possible to reduce your debt burden by a third without making any principle payments for 5 years.

by Averageman | 29th Jul 19, 2:46pm 1564368381

Agreed. Its all about a speculators paradise for retirement. Lets them eat cake while the music is stopping. Gee this cake tastes great...oh wait there are no seats left to sit...

by linklater01 | 29th Jul 19, 9:29am 1564349382

I think this must be one of the stupidest articles i have seen here. Kiwisaver is gradually getting more Kiwis into the stockmarket and this is a good thing. For too long,we have had an unhealthy fixation with property-buying and selling to each other does nothing for the country's real wealth.
This idiotic idea would be a huge backward step and fortunately,I see no chance of it happening.

by Pietro | 29th Jul 19, 9:43am 1564350200

The issue is simple: increase the pool of buyers and prices go up. So property investment will make it harder for young people to buy a home. Not far off a zero sum game. And what exactly are the preferential tax benefits of home ownership? Capital gains are not taxed on any asset class, broadly speaking and negative gearing has been canned. I would imagine that giving young people access to international equities and bonds will do more for them and the country than letting them jump on the merry go round of property speculation.

by Yankiwi | 29th Jul 19, 10:53am 1564354416

Continuing the ladder analogy, using KS to purchase rental properties is like the people that want to get on the ladder burning the ladder.

It is the entire "property ladder" mentality that has made house prices unaffordable in the main cities of NZ, even though on an objective basis there are other asset classes that have dramatically outperformed property investment in the past few decades. A responsible financial journalist should be advocating responsible investments rather than chasing the property "ladder". If you just have to do property in your KS, investigate real estate investment trusts. No need to add another way to get people separated from their money.

disclaimer: I've made money on the property ladder. I've also made a far higher net return via passive investments in share market index funds. I consider a home to be just that, a home. It is a rather poor investment as compared to the share market. Well, at least for my lifetime. Maybe the next 60 years will be different!

by Independent_Observer | 29th Jul 19, 7:37pm 1564385854

The argument from most property speculators is that the past predicts the future - so you're safe then with your share investments clearly.

by andyb | 29th Jul 19, 11:48am 1564357688

Sure... pour your retirement savings into a leveraged property play. Cos house prices only go up, right?

I suggest Jenee and others pick up a book and read about portfolio theory and diversification. Otherwise we will have people cashing in their kiwisaver to buy houses in Patea or Eketahuna and then moan that the value never went up over 20 years.

Would you permit your Kiwisaver manager to put all of your money in one investment?.. NO. So why should we let inexperienced investors do it?

by Independent_Observer | 29th Jul 19, 7:53pm 1564386799

I'm not sure if this issue has been look at from this perspective, but in terms of overall NZ economic strength, shouldn't we want as much investment in NZ business as possible? Via major investors such as our kiwisaver schemes? Why would we want everyone pulling the pin on kiwisaver. We'd be pulling capital from our employers and in theory ourselves and our jobs market - i.e. the productive economy.

by Yvonnelee | 29th Jul 19, 11:10pm 1564398604

It is no different to cashing up our family benefit, which was the only way I managed to buy a house years ago.

by PocketAces | 30th Jul 19, 7:08am 1564427317

That would have been your own house, what is being suggested here is that people should be able to take money out of KS to buy an investment property, you would not have been able to do that with the family benefit. To do something similar today would mean you could cash up your Working for Families to buy a house, not your pension scheme, there was none of that then.

by b21 | 30th Jul 19, 3:56pm 1564458972

This is the most stupid idea I've read about in a long time. It can be summed up as "Let's continue stealing from our future selves so our banks can keep on going with their fictional economy"

by Carlos67 | 2nd Aug 19, 2:21pm 1564712505

Long term your better with a house than the money in Kiwisaver. If I was starting out again, Kiwisaver would be my house deposit savings scheme. As soon as it hit the required threshold to become the house deposit, I would bail out of it permanently. Your house then becomes your retirement savings scheme. Your aim is to then have the house paid off by the time you retire, preferably much earlier and your set.