Unconvinced by KiwiSaver changes

The Government announced:

Since 2010, Kiwis have been able to withdraw from their KiwiSaver accounts to assist with the purchase of a first home so long as they live in the homes they buy.

“However, workers in service tenancies, such as farm workers, rural teachers, country cops, and defence personnel, have effectively been locked out of first home withdrawal because their jobs require them to live in employer-provided housing,” Nicola Willis says.

“That’s not fair, so we’re making a technical change to the KiwiSaver Act to ensure workers in service tenancies aren’t denied the opportunity to put a foot on the property ladder.

“The change will allow service tenancy workers to use their KiwiSaver for a first home purchase without having to live in it.”

I’m not sure about this change. If the tenancy workers are not living in the house, then it is an investment property – not a first home. Sure it might become a first home for them in the future, but it isn’t for now.

These workers will only be better off if the increase in value from their investment property is higher than what they would get from their KiwiSaver fund.

The benefit of allowing people to use KiwiSaver to buy a first home is the stability it gives being in yiour own home, not at the whim of a landlord. But when your employer provides your housing, this doesn’t apply.

Scott Simpson says the Act will also be changed to allow first-time farm buyers to put their KiwiSaver balances towards the purchase of a farm through a commercial entity they majority own, where it will be their principal place of residence.

KiwiSaver rules currently allow the purchase of a farm under a KiwiSaver member’s name (so long as they intend to live on it) – however, in practice, most farms are purchased through a company or trust.

“This reflects the commercial reality of modern farm ownership,” Mr Simpson says.

“Most farms are purchased through companies or trusts. Until now, that has prevented aspiring farmers from accessing KiwiSaver in the same way as someone buying a house in town.”

This change seems sensible, so long as it is going to be their actual home. However I doubt whether a say $35,000 KiwiSaver balance will help much. For example the median diary farm is 133 hectares and they go for around $40k a hectare so cost would be over $5 million. So I have doubts it will be taken up much.

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