Home ownership rates among retirees are falling

October 31, 2022

With homeownership rates falling and people taking out bigger mortgages, an increasing number of New Zealanders are entering retirement renting or with an unpaid home loan.

This is what emerges from a new analysis by Te Ara Ahunga Ora Retirement Commission, taking a closer look at how housing has changed over the past three decades - and the impact on retirement outcomes. Read on to learn more.

Fewer new retirees own their homes outright

According to the report, in 2018, 80% of those in their early 60s were homeowners, with one in five still paying off their mortgages; 20% were paying rent, and many were still in paid work.

In comparison, in 1986, 87% of Kiwis over 60 were homeowners with mortgages paid off, and for most, they were no longer in paid work.

And retirees’ homeownership rate is expected to fall even further: Te Ara Ahunga Ora estimates that by 2048, the balance will shift to 60% homeowners and 40% renters.

Why NZ Super is no longer enough

According to Te Ara Ahunga Ora director of policy, Dr Suzy Morrissey, these insights highlight the importance of not relying on NZ Super to cover additional housing costs.

The analysis shows that Kiwis renting in retirement are likely to be spending 40% or more of their NZ Super income on housing. As for those still paying off mortgages, 80% spend more than 40% of NZ Super on housing costs - with more than half spending more than 80% of their superannuation on housing.

“It’s a real challenge for people to make ends meet if they are having to use substantial amounts of their NZ Super to cover housing costs,” said Dr Morrissey. “When NZ Super was introduced, it was with the underlying assumption that those accessing it would be mortgage-free homeowners. Today, the reality is very different.”

What does it mean for you?

Whether you own a home with a mortgage or are looking at renting for life, planning for the future is important. And the earlier you start, the better.

If you have a mortgage, it’s a good idea to think about ways to structure your home loan so that you can pay it off as fast as possible. Not only this would save you money on overall interest costs, but you’d have one less thing to fund during your retirement years - your mortgage repayments.

If you’re renting, on the other hand, it’s all the more important to consider your future sources of income. You’ll likely need to save more and invest in KiwiSaver or other investments, to bridge the gap between NZ Super and your expenditure.

Get in touch if you’d like to talk

As financial advisers, we’re here to help you achieve a comfortable retirement lifestyle. Please don’t hesitate to contact us if you’d like to discuss your needs and goals.

The information contained in this publication is intended for general guidance and information only. It has not been personally prepared for you. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult with us before making any investment decision. Historical market performance may not be indicative of future market performance.