Home seekers gifted money

02:11, Jul 16 2014
PARENTAL HELP: Parents are tending to gift rather than go guarantor to help children get into the South Canterbury housing market.

Parents are increasingly "gifting" part of their deposit to their children looking to get into their first home.

While a 20 per cent deposit cap was imposed by the Reserve Bank last October Timaru Mortgage broker Malcolm McDonald said 90 per cent lending was available now.

He had noticed first home buyers were being gifted money from their parents to get a 10 per cent deposit together and relying more on Kiwisaver.

"We have had 90 per cent lending back in place for some time now.

"If you look at the average house price in Timaru now it is pretty hard to get a house under $240,000.

"To get that 10 per cent deposit people are getting help from their parents. Instead of acting as guarantors we are seeing more gifting than before."


KiwiSaver had two features to assist people buying their first home, including its deposit subsidy and savings withdrawal schemes. Under the deposit subsidy, people could withdraw up to $5000 if they had been in KiwiSaver for more than three years.

Statistics from Housing New Zealand, which managed the subsidy scheme, showed its payouts to first-home buyers had increased exponentially during the past three years.

In the year to June 30 last year, $17.4 million was paid out in 4603 subsidies to first-home buyers, compared with $9.46m in 2820 subsidies the previous year.

Under the savings withdrawal scheme, people could withdraw some or all of their savings, apart from the $1000 and other Government contributions, to buy their first home if they passed criteria.

Welcome Home loans were also available for eligible first-home buyers, which only required a 10 per cent deposit but capped the value of homes people could buy.

"First home buyers are more aware of Kiwisaver and using that to get their deposit with mum and dad providing for the shortfall by gifting," McDonald said.

He had noticed this trend since lending restrictions relaxed last October.

"Kiwisaver has also lifted its cap in this area to $300,000 and joint income to $120,000 meaning more people are qualifying.

"The biggest problem in this market is there is a lot of people who can't afford to buy without assistance. A solo person on $40,000 is going to struggle to get into the market."

The market was buoyant, he said.

"Homes are selling, the good ones are not lasting that long."

The Timaru Herald