We are going back and forth on whether pensions should be used for housing. I am concerned about any such policy being a pensions fix for what is essentially a housing market problem. We run the risk of distorting the housing market by using pensions; we need to be really careful about the correlations of using one policy area to intervene in another.
Anna Brain from Nest Insight and the Australian Super Members Council (SMC) provide helpful context about the New Zealand experience that I believe we can use as a cautionary tale.
New Zealand has allowed access for first time home purchase through KiwiSaver since 2010. The proportion of first home buyers accessing KiwiSaver to purchase a home rose from 65% in 2015-16 to 77% in 2023-24. What began as an option has become, in practice, a near-requirement. People now factor pension withdrawals into their housing plans as a matter of course.
The SMC reports that house prices in New Zealand rose by 134% between June 2010 and June 2024. While obviously these rises are not all attributable to early access, they are faster than in the two preceding decades, and faster than house price growth in Australia over the same period. The SMC also notes that KiwiSaver withdrawals appear to track house price movements; when withdrawals rise, prices follow.
Meanwhile, home ownership rates in New Zealand have fallen since 2010, with a drop of around 7% among people in their 30s and first home buyers are taking on more debt than before. Since 2014, the proportion of high loan-to-value ratio loans taken out by first home buyers has risen from 25% to 75%.
The overall picture from New Zealand is of a policy that has transferred value from pension savings into house prices, without improving access to home ownership. The people it was designed to help are no better off as homeowners, are carrying more mortgage debt, and will retire with less savings.
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