BetterSaver Rupert (00:05):
Welcome to the BetterSaver podcast. Today, we’re diving into the once in a lifetime experience of first home buying. We’re going to tell you exactly what you need to do, if you’re wanting to withdraw your KiwiSaver and use it to buy your first home. Before we get into it, it’s important that this podcast doesn’t give financial advice. Investment decisions are important, and if you need help, you should talk to a financial advisor. But first I’m on the street and I’m asking some first home buying Aucklanders how they’re feeling about it all.
Aucklander #1 (00:33):
Uh, quite terribly.
Aucklander #2 (00:34):
It’s a shit show, especially as a single woman.
Aucklander #3 (00:36):
Terrible. It’s impossible to get a house.
Aucklander #4 (00:41):
It’s really hard we’ve been to heaps of open homes every weekend, and, um, been to heaps of auctions, so many people, um, yeah, it’s really hard.
Aucklander #5 (00:53):
Uh… it’s hard.
BetterSaver Rupert (00:59):
Okay. So some necessary venting complete. Before we look at KiwiSaver withdrawal for first homes, we should, first of all, take a quick look at what’s actually happening in the New Zealand property market right now. First question is how expensive are New Zealand houses? The answer is pretty expensive. In just over five years, house prices have risen faster than incomes by 19%. This means that despite an increase in the average income house prices have been rising at a faster rate right now, it costs about 10 times the New Zealand median income to buy a median house in Auckland. Unfortunately, the median house price sitting around three times, the median annual income is generally considered affordable housing and Auckland’s way off that. We could go down an absolute data wormhole here, but it’s clear that in many parts of New Zealand, it’s incredibly hard for Kiwis to buy a house.
BetterSaver Rupert (01:49):
The main reason for rising house prices in New Zealand is that demand is outstripping supply. So between 2013 and 18, the population of New Zealand increased by almost 500,000 people. And unfortunately the supply of houses hasn’t been able to keep up. This might not have much an effect in a small town in rural Southland, for example, but it has a big effect in most urban centers. While some regional councils are consenting the greater number of houses to be built than ever before, per capita, we’re lagging behind what we were doing in the 1970s. So in short there’s a lot of buyers, not enough sellers, price goes up, you get the picture.
BetterSaver Rupert (02:30):
What’s actually the solution to all this? I mean, this could take a bit of time. So we’re going to keep it really brief. According to the Financial Times, New Zealand needs to regulate and reform planning law. New Zealand is a land rich country that has plenty of scope to build more houses and needs to increase supply, to meet current and future demand, particularly close to urban hubs. Ignoring supply-side issues and attempting to use monetary policy levers to influence the housing market in isolation may be ineffective. In other words, there are various strategies. New Zealand could pursue to improve housing affordability, but firstly, we need to make it quicker and easier and less expensive to build homes. In summary, New Zealand has housing affordability issues, but BetterSaver’s here to assist you with the stuff that you can actually control.
BetterSaver Rupert (03:19):
So now let’s start by working through our seven step guide as to how you can use your KiwiSaver to buy a first home.
BetterSaver Rupert (03:25):
Step one, you need to check that you are actually eligible for first home withdrawal. What are the criteria that you need to meet? You need to check that you have been a member of a KiwiSaver scheme or compliant superannuation fund for at least three years. You need to check that this will be your first home that you intend to live in the home. And this home is actually in New Zealand. As well as this, you need to check that you’ve never before withdrawn KiwiSaver for a first home purchase.
BetterSaver Rupert (03:53):
Step two, you need to check that your KiwiSaver balance is enough for your house buying budget. Lenders usually require a minimum deposit of 20% of the house price that you are buying. And just reminder when withdrawing your KiwiSaver, you can withdraw all of your contributions or your employer’s contributions, all government contributions and any interest you have earned. Then the only rule is that you need to leave $1,000 in your account.
BetterSaver Rupert (04:19):
Step three, check that you have been in the right kind of KiwiSaver fund for your withdrawal timeframe. Now, how would you actually check you are in the right kind of fund for your goals and timeframe? If you’re already a BetterSaver customer, you’ll already be in the right kind of fund. If not head to bettersaver.co.nz. And in five minutes you can find the right kind of fund for your withdrawal timeframe.
BetterSaver Rupert (04:40):
Step four, before you purchase house, let your mortgage broker or bank know that you plan on using your KiwiSaver balance to help you in your home purchase. To do this you’ll need a first home buyers letter. For this you’ll need to go directly to your KiwiSaver provider and ask them how they do it. For some providers, you’ll be able to generate this letter automatically by logging into your account. If at any point you need any help, just live chat with us at bettersaver.co.nz or email us at email@example.com.
BetterSaver Rupert (05:07):
Step five: after you’ve hopefully been successful and you’ve got a sale and purchase agreement in place, request a first home purchase withdrawal form from your provider. Some providers have different requirements, but you’re likely to need to give them the following: a certified copy of some identification, a copy of the sale and purchase agreement, your solicitor’s letter, or certificate a deposit slip for your solicitor’s trust account.
BetterSaver Rupert (05:38):
Step six, really it’s about watching the magic happen at this point, funds will be transferred from your KiwiSaver provider. So your solicitor’s trust account before settlement date. KiwiSaver providers have minimum timeframes for this to happen. So get in touch with them as early as possible.
BetterSaver Rupert (05:55):
Step seven, first home grants. Okay. And how do they actually work? So depending on whether you’re buying an existing home or new build, you can get up to $10,000 towards your first home. The first home grant helps people buy their first home. But if you’ve owned a home before you might still be able to Kainga Ora homes and communities administers this grant, you can check full eligibility criteria through their website.
NB: If you think you might be eligible, you should apply for the grants at the beginning of this process and get pre-approval for up to 6 months to use this amount towards your deposit.
BetterSaver Rupert (06:20):
That’s a lot of information for a podcast. So we’ve published a more detailed guide to all of this on our website. Check it out at bettersaver.co.nz
BetterSaver Rupert (06:34):
BetterSaver is here to make the KiwiSaver part of your financial journey a little easier. If you have any questions so that you’d like us to cover off in future podcasts, please hit us up at hello at bettersaver.co.nz, and for more info, check us out at bettersaver.co.nz