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COMMENT: Allow KiwiSaver for investment properties

It’s time to allow KiwiSaver to be used to buy investment properties as well as first homes, argues Century 21 New Zealand owner Derryn Mayne.

Tuesday, June 16th 2020, 10:13AM 1 Comment

Century 21 NZ owner Derryn Mayne

The Government needs to broaden KiwiSaver’s withdrawal criteria to allow more New Zealanders to access the scheme to buy an investment property.

KiwiSaver has more than three million members with average balances of around $20,000, with many accounts experiencing volatility in value in the wake of the Covid-19 health and economic crises.

Inland Revenue figures released today also show that in April and May more Kiwis tapped into their retirement savings by making hardship withdrawals.

Last year interim Retirement Commissioner Peter Cordtz suggested that KiwiSaver members should be allowed to withdraw money from their accounts to buy rental properties, not just first homes.

His reasoning was that high house prices in cities like Auckland, Wellington and Tauranga mean it is difficult for KiwiSaver members who work in those cities to purchase a home there to live in.

But he said that if those KiwiSavers could buy a property in a more affordable part of the country, they could use it as an investment to progress on the property ladder or simply to retire to one day.

I believe this concept needs to be urgently revisited by the Government. Given these unprecedented times and the growing opportunities out there, the rules should now be broadened.

It is possible to withdraw funds for your first home, or for land to build your home if you have been in KiwiSaver for at least three years. There are also circumstances in which people may access their funds if they have previously owned a home.

Yet there remains absolutely no opportunity to use the voluntary savings scheme to buy a property you are not going to live in.

The strict owner-occupier criteria was fine during the Global Financial Crisis over a decade ago, as there were far less people in the scheme and the average balances were less than $3,000.

But the Government now needs to think of new ways to encourage property purchases.

While we are not short of buyers at this point, as a country we need to think laterally if we want to keep our housing market ticking along nicely.

Put simply - it’s wrong that people can only access KiwiSaver as an owner-occupier property purchaser, when the reality is a lot of people simply can’t afford to buy where they want to live.

“If you live in Auckland and can’t afford to purchase there, you should be able to stay renting but use your KiwiSaver to buy an investment property in say Waikato.

Right now, that option is increasingly appealing given the lower deposit requirements, rock-bottom interest rates, and an emerging buyers’ market.

As KiwiSaver funds cannot be used for an investment property, those using the scheme must live in the home for at least six months.

But any fear of investment properties, using KiwiSaver, being quickly flipped could be easily rectified.

An additional rule could ensure people accessing their funds for an investment property have to hold onto to that property for certain amount of time.

Enabling Kiwis to use the scheme to help buy an investment property is a safe bet for them and would be a positive for the country.

It would help to boast home ownership which has declined over the past 30 years from about 78% in the 1980s to about 55% now. Also, residential property will always deliver a strong capital gain over the long-term.

What is more, such a simple policy tweak would give a shot in the arm to New Zealand’s property market and help the overall economy.

Read more:

Allow KiwiSaver withdrawals for investment properties 

Don’t use KiwiSaver for investment property – yet 

Tags: Auckland capital gains Century 21 coronavirus Covid-19 first home buyers housing market investment landlords Lending mortgages property investment real estate sales activity

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Comments from our readers

On 16 June 2020 at 11:20 am Peter L said:
Given that one of the pillars of the the current Labour-led Government beliefs is that all residential property investors are the devil-incarnate, Derryn is dreaming if he thinks that they would allow such a scheme.
Their policy is to eliminate private landlords, not create them.

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ANZ 4.44 3.15 3.25 3.85
ANZ Special - 2.65 2.75 3.35
ASB Bank 4.45 3.19 3.19 3.49
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BNZ - Std, FlyBuys 4.55 3.25 3.29 3.59
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BNZ - TotalMoney 4.55 - - -
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union South 5.65 4.75 4.75 -
First Credit Union Special 5.85 3.35 3.85 -
Heartland 3.95 2.89 2.97 3.39
Heartland Bank - Online - - - -
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HSBC Premier 4.49 2.60 2.65 2.80
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HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 3.99 2.58 2.68 2.79
Kainga Ora 4.43 3.29 3.39 3.85
Kiwibank 3.40 3.40 3.54 4.00
Kiwibank - Capped - - - -
Kiwibank - Offset - - - -
Kiwibank Special 3.40 2.65 2.79 3.25
Liberty 5.69 - - -
Nelson Building Society 4.95 3.45 3.49 -
Pepper Essential 4.79 - - -
Lender Flt 1yr 2yr 3yr
Resimac 3.49 3.45 3.39 3.69
SBS Bank 4.54 3.29 ▼3.19 ▼3.49
SBS Bank Special - 2.79 ▼2.69 ▼2.99
The Co-operative Bank - Owner Occ 4.40 2.79 2.79 3.39
The Co-operative Bank - Standard 4.40 3.29 3.29 3.89
TSB Bank 5.34 3.59 3.49 3.79
TSB Special 4.54 ▼2.65 2.69 2.99
Wairarapa Building Society 4.99 3.75 3.99 -
Westpac 4.59 4.15 4.09 4.49
Westpac - Offset 4.59 - - -
Westpac Special - ▼2.65 2.69 2.79
Median 4.55 3.22 3.22 3.44

Last updated: 3 July 2020 8:15am

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