New research from Consumer NZ has found the Bank of Mum and Dad plays a sizeable role when it comes to helping young home buyers on the property ladder, ranking fifth after ANZ, ASB, Westpac, and BNZ when it comes to owner-occupier loans. The Bank of Mum and Dad (BOMD) has doled out a whopping $22.6 billion in loans.
Consumer research found that 14% of all families have supported their kids financially to buy a property, with an average contribution being $108,000. This equates to roughly 208,638 parents. The most popular form of assistance was contributing towards a deposit, with more than half (61%) of parents helping in this manner. Three out of five parents don’t expect to be repaid.
In 2002, the average house price in New Zealand was $186,000, which was six times the average income of $29,432 per year. Fast forward 20 years to 2022, and the median house price has risen to $890,000, which equates to more than 15 times the median income of $56,836.
“We’ve reached a point in New Zealand where it’s no longer enough to do all ‘the right things’ to buy your first home – to get a job with a good income, save furiously and cut back on the ‘nice to haves’,” said Gemma Rasmussen, head of campaigns and communications at Consumer NZ.
“The role of the Bank of Mum and Dad is more pivotal in the first home buying process, but it also means that we’re seeing a greater social divide of who gets to buy a first home and who does not.
“The overwhelming majority of parents (87%) either offered to or were happy to help get their children on the property ladder. There is recognition that a first home purchase isn’t as straightforward as it was 20 years ago, which is why many parents are so willing to help."
The majority of parents (62%) dipped into their own savings to help with a home deposit, but nearly one in four cut back on expenses to make their contribution possible. With home ownership becoming a more remote dream for many New Zealanders, some parents are pinching finances in an effort to get their children on the ladder. That said, 61% of parents said it was ‘no financial strain’ to help their children.
The most popular form of parental assistance was contributing towards a deposit, with more than half (61%) of BOMD parents helping in this way, but many parents helped in multiple ways. This isn’t to say that some parents’ offer of assistance didn’t come without strain. For one in 10 parents, their financial contribution put them under moderate to serious financial strain.
“Our research found that more than half of New Zealanders who don't own property consider themselves to be ‘locked out’. The most common issue cited is that the deposit goalpost keeps shifting. You’re saving, and then overnight the property price jumps up tens of thousands of dollars.”