It's not just first-home buyers turning to the Bank of Mum and Dad
Mums, dads and grandparents around New Zealand, brace yourself for another financial shock. Lock up your wallets and batten down the doors to your retirement savings.
There's another variety of adult Wood Hen on the loose and they're looking for more of the shiny stuff to feather a bigger nest for their flock.
This trend has so far slipped under the radar, but forewarned is forearmed.
These adults are known in the housing market as Second Steppers.
They've got a first home and are looking to upsize, either because they'd like to start a family or fancy a garden and garage.
"Lovely", you think, I'm about to become a grandparent, great grandparent or dog-sitter. Get on with it. But for some of you, it's going to involve another request for a chunk of your retirement savings.
The Bank of Mum and Dad didn't close its branches after university and a first-home deposit. Arise the Kissers - Kids Insisting Second Steps Erode Retirement Savings.
Lloyds bank in the UK under-takes surveys of the Second Stepper market.
They've discovered a third of adults are unable to make their next move on the property ladder without financial support. They turn to their parents (17 per cent), grandparents (9 per cent) and friends (6 per cent).
These trends are likely to take a similar path in the New Zealand market as the same fundamental issues bubble away.
1. A significant monetary gap between New Zealand's bottom-quartile housing and the median house price ($185,000)
2. The potential of rising interest rates after a long stable period
3. Supply constraints of mid-sized family homes
4. Mid-sized houses being extended rather than sold, adding to supply issues
5. Tighter lending criteria and larger deposits required
6. Moving costs – real estate and legal fees
Nearly a quarter of first-time sellers are delaying having children until later in life (23 per cent) or planning fewer children (12 per cent). A quarter also believe it's harder to move up the property ladder than get on it in the first place.
Don't get too comfy if your kids became first-time buyers under their own steam. Only half of Kissers are double-dippers. The other half approaches the Bank of Mum and Dad for the first time.
Affordability of Kissers
If you're one of those families who can afford to provide house deposits for all your children, more than once, go for it and don't hold back.
Despite the lock-up-your-wallet tone, this is not a guilt trip. If the erosion of your own retirement fund isn't an issue, get the bank notes out and the grandchildren rolling in.
Roughly half of Kissers believe their parents had to make sacrifices to help them get a bigger house.
For those of you starting to sweat, bear in mind four things before you make your decision.
1. Can you afford to treat each child equally? Don't kid yourself with the attitude of "we'll give it to those who need it". Unless there are truly exceptional circumstances at play, the family dynamic will change and it's a high price to pay. You need to multiply out the numbers and front-it with adult Kissers. A request for $25,000 is a $100,000 problem if there are four offspring. Offer them their share of what you can afford and payout the others.
2. "We can adjust our will to make it fair on the others." That's quite a legitimate point, but the others have missed out on the capital gains and interest savings on their own homes. At least double should be allowed for in the interests of inheritance fairness.
3. "You don't need the money until you retire." They may well be able to pay it back, but if you're in your 50s you need to be in turbo savings mode. It's not the measly term deposit rate you forgo. Your opportunity cost is the growth in KiwiSaver or other sharemarket funds. Balanced funds have grown 9.3 per cent a year for the last five years. Over a 10-year period those returns would turn $25,000 into $60,000.
4. They will inherit. Depending on your age, they can wait. Despite the wailing over Baby Boomers owning all the houses at inflated prices, you are the worst generation at spending money. As your top-heavy demographic dies off, an enormous wave of money, housing and new cars will hit the economy.
Janine Starks is a financial commentator with expertise in banking, personal finance and funds management. Opinions in this column represent her personal views. They are general in nature and are not a recommendation, opinion or guidance to any individuals in relation to acquiring or disposing of a financial product. Readers should not rely on these opinions and should always seek specific independent financial advice appropriate to their own individual circumstances.