KiwiSaver will be the cornerstone asset for many New Zealanders as the first rung on the property ladder inches ever higher, according to Joe Bishop, Kiwi Wealth head of retail.
Bishop said a new Kiwi Wealth investment survey due out tomorrow found many New Zealanders – particularly younger cohorts – were increasingly shut out of the property market after years of rising prices.
“With property out of reach for so many New Zealanders the result highlights the importance of KiwiSaver,” he said. “It can help those who would otherwise struggle to save because it’s deducted at source.”
For a swathe of young New Zealanders, KiwiSaver was also emerging as a key route into the housing market – aided by the “bank of mum and dad” – via the first home withdrawal option, Bishop said.
The number of KiwiSaver first home withdrawals hit a 2019 high in March as more than 3,800 members cashed in a collective $95 million to fund a house purchase. More than 40,000 members withdrew a total of almost $950 million from KiwiSaver under the first home scheme during the 12 months to the end of this March, Inland Revenue Department (IRD) figures show.
Nonetheless, Bishop said many KiwiSaver members currently on a contribution hiatus were likely the same ones who were struggling to enter the property market.
The latest IRD statistics count 136,178 KiwiSaver members on contribution holidays as at the end of March – up more than 1,300 on the same time last year but steadily declining since a December 2018 high.
He said the inaugural Kiwi Wealth ‘State of the investor nation’ study had uncovered a surprisingly high level of financial stress in NZ that was somewhat at odds with the “rock star economy narrative”.
“We found one in four New Zealanders are just living paycheck-to-paycheck,” Bishop said. And for younger New Zealanders the same metric jumps to 64 per cent.
“It shows there are a lot of people who are not on the housing ladder and who missed out on the boom feel their chances of getting into the property market are more remote than ever,” he said.
Those who “came of age” in the post global financial crisis era faced higher living costs and carried more debt than previous generations, Bishop said, leaving them little capacity to save and invest.
The Kiwi Wealth survey found financial conditions were generally tougher for regional youths rather than their big city compatriots.
“Young people in the provinces are twice as likely to be struggling financially compared to young Aucklanders,” he said in a release. “That was a surprising finding, given how tough the Auckland market has been for some time for first-home buyers, but shows that generally lower incomes in the regions are a very real problem.”
Despite the pessimism of youth, a majority of those surveyed (80 per cent) expect property prices to rise with Wellingtonians (91 per cent) especially bullish about real estate.
Bishop said the Kiwi Wealth study set a benchmark for how New Zealanders are feeling financially that would be tracked annually in repeat surveys.
The study, carried out by market research firm Perceptive, tapped a demographically-representative sample of 2,101 New Zealanders via an online survey.