First-home buyers have become a lot less aggressive. Photo / Fiona Goodall
First-home buyers have become a lot less aggressive. Photo / Fiona Goodall
The number of people dipping into KiwiSaver to buy their first home has dropped sharply in the past year after a record high in 2021.
Figures from Inland Revenue show 38,426 members collectively took $1.23 billion out of KiwiSaver to buy a home in the year to June 30.
Butthat was down on the 54,205 who took $1.596b out in the year to June 30, 2021.
Karen Tatterson, a mortgage broker with Loan Market, said fewer people overall were buying houses and many first-home buyers had put their plans on hold.
"The first-home buyers got quite scared. And so a lot of them didn't exit the market but they haven't been as aggressively looking to go into the market as they had."
Tatterson said there was a lot of talk about property prices falling so people were waiting for that to happen before they came back into the market.
Economists have been predicting house prices to fall by up to 25 per cent by the end of next year from 2021's peak.
"It is tough out there and a lot of people are struggling to find something. "
She said first-home buyers could come back to the table once they know where the market is.
While the number of withdrawals has fallen, the average amount withdrawn has gone up over the past year from $29,000 to $32,000.
Tatterson said the other factor that had affected people was the fall in value of KiwiSaver portfolios.
"A lot of people are probably being a bit more cautious and waiting for their KiwiSaver to rise in value before they go ahead and make that decision to come back to market."
KiwiSaver returns sunk into the red during the year to June 30, with the average KiwiSaver conservative fund down 6.9 per cent. The average return for balanced funds was -8.7 per cent.
Tatterson said buyers wanted to wait for the property market to fall further and for their KiwiSaver balances to recover before making a move.
She said also banks weren't doing pre-approvals at the moment and test interest rates had jumped a lot.
"It was low 6s, it's now getting up into the 8s. Plus we are also seeing the cost of living rise."
That limited how much people could borrow.
The Credit Contracts and Consumer Finance Act was tightened in December, catching many people off guard.
Changes have since been made to ease the restrictions and more changes are due by March next year.
Hardship withdrawals ease back
In more positive news, hardship withdrawals from KiwiSaver have eased back to pre-Covid levels.
The number of withdrawals spiked up to 22,161 in the year to June 30, 2021, but have since fallen back to 15,970 - just slightly above the number of withdrawals made in 2018.
The total amount withdrawn also fell from $145m to $100m between 2021 and 2022 with the average dropping from $6544 to $6303.
Glenys Talivai, chief executive of Public Trust, which acts as the trustee for multiple KiwiSaver schemes said, based on its own data hardship withdrawal numbers were much higher in 2020.
"The main reason was people citing that they had lost their job due to pandemic lockdowns."
Talivai said it had not seen the same levels in 2021 or the first half of 2022.
"We put that down to a number of factors including the wage subsidy - that has helped people get through financially and for businesses that could, continue to operate."
Glenys Talivai, chief executive of Public Trust. Photo / Jamie Wright
Talivai said unemployment rates had also dropped with people able to find other employment even if they lost work.
She said people could access their KiwiSaver for hardship reasons multiple times if their circumstances did not improve.
Public Trust figures showed more than 40 per cent of all applications were from people who had previously made a withdrawal.
"We usually allow members to withdraw enough to cover 13 weeks of living expenses, so if their circumstances haven't changed over this time, then they will usually reapply for a further withdrawal."
Talivai said it saw a reasonable number of repeat applications - particularly in the first year of the pandemic.
But she said there came a point in time where people had nothing left in their KiwiSaver account.
"There will a portion where hardship withdrawal applications have just reduced because the people who have needed it - and may still need some assistance - don't have that option available to them anymore."
Talivai said the main reasons people applied for hardship was a job loss or a medical scenario.
"Often when people get sick they need money to fund treatment and it might not fall within the serious illness category they could apply under. That has had a flow-on effect into being unable to pay everyday outgoings."
Talivai said it was now looking at how the cost of living and rising interest rates might put pressure on households and flow onto hardship withdrawals.
"That is something we are mindful of. But it is very difficult for us to predict what that will mean for hardship applications because there are lots of different interventions people can make before having to dip into KiwiSaver."
She said her advice to get budgeting advice early to avoid making a withdrawal.
