Olivia* was giving up on the idea of ever owning a home. The project coordinator and her partner, a teacher, had opted to try to buy in Ōtautahi Christchurch, where prices were lower than other main centres, and they would be closer to family.
“We had a 20% deposit saved, but as the market went up, that 20% got smaller and smaller,” she says. As their deposit portion shrank, the banks became squeamish about lending to them. “Every month that went by, it became more out of reach, because of the speed that house prices were going up.”
Finally, Olivia asked for help from her parents, who decided to buy the house on the couple’s behalf. She and her partner gave their deposit to her parents, who – with an existing property of their own – quickly got bank approval. The couple moved in, paying all mortgage payments and costs. A year later, they were established enough to get bank approval for their own mortgage and bought the house from her parents for the same price they’d originally paid.
“It was an absolute godsend,” Olivia says. “I’m sitting in our house today and I can’t believe it. We couldn’t afford this house now. It’s gone up astronomically.”
Over the past year, value estimates for the property have risen so the house is now worth about $200,000 more than what they paid.
“That was the gift my parents gave me – to essentially freeze the market for us,” she says. “We’re incredibly lucky … [But] when we last spoke to the bank manager they said almost nine out 10 people now are in the same position as you: they’re either buying with parental help, or parents are buying on behalf.”
New research shows the “bank of mum and dad” now ranks among the top financiers in New Zealand, having doled out an enormous $22.6bn in financial assistance. (The $22bn figure captures all outstanding financial assistance by living parents, compared with the banks’ total current outstanding lending.) If taken as a single block, that puts the country’s parents alongside the major banks as the biggest providers of housing finance in New Zealand.
The report, produced by nonprofit research and advocacy body Consumer NZ, found across the country, nearly half of all children who bought a house, or 48%, had support from their parents – with the average contribution being $108,000. In Auckland, New Zealand’s largest city, 58% of children who bought a property had family support, and the amounts they gave were $20,000 more than the national average. Since 2018, mortgage brokers have reported that more than 50% of first-time buyers are doing so with the assistance of their parents, with some putting the figure as high as 60-70% and beyond. With average house prices up 30% over the course of 2021, to over $1m, that figure is now likely even higher.
The data illustrates the stark realities of New Zealand’s housing market, where high prices mean many younger New Zealanders struggle to get on the property ladder, and assistance from parents has become the norm. It also raises concerns that the country, which has long prided itself on having a softer class system, is shifting to a norm where wealth and housing is concentrated among a landowning class, and those who do not benefit from intergenerational wealth are left without long-term housing or financial security.
“Increasingly, only the children of people who own homes will be able to also own homes,” says economist Shamubeel Eaqub. “That half of adults who owned or bought houses did so with help from their parents – that’s an extraordinary number. But it also makes sense, given how crazy our house prices are – the average house price is nearly 10 times average income – so to save a deposit for it is nearly impossible for most people.”
“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’,” says 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 homebuying 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.”
Carolyn Robertson, of Christchurch, says she and her husband were able to buy their home 15 years ago by co-buying with her parents, who already owned a home.
They say the inherent inequalities of the market became clear to them through the process of buying: Paul, her husband, was raised by a single mother, whom he says would never have been able to assist in the same way. “I felt a sense of injustice,” he says. “I was super, super grateful for what Caroline’s parents did for us. But I also knew that was never an option for my mum.”
“You’ve got to have parents who are financially stable,” says Robertson. “It’s a cruel system. It ingrains inequalities.”
Those dynamics are also putting increasing pressure on the country’s parents – some of whom are downsizing and carving into retirement savings to assist their children. Consumer NZ’s research found that of the parents who assisted their children, 62% dipped into their savings, 17% cut back on their own expenses and 17% offered their own home as equity. For one in 10 parents, their financial contribution put them under moderate to serious financial strain – in Auckland, it was almost 20%.
Pauline, who works in education in Auckland*, says she and her husband opted to sell the family home and downsize to provide their four children with help for their own deposits. “I feel really strongly about inheritance – I think it’s so bloody stupid to get to the end of your life and leave money to your kids when they don’t need it,” she says. “We could see that housing prices were just going crazy. And we wanted the kids to be able to get into a house.”
Pauline says she and her husband had bought their house in the 70s, in a once-undesirable Auckland suburb. By the mid-2000s, it was worth “a ridiculous amount of money”, she says: average house prices in Auckland are now over $1.2m and are 65 times higher than their 1970s level.
She says among her peers, giving your children a large chunk of deposit is the new normal. “In our circle of friends, this is what’s happening,” she says. “We were lucky, and our kids are lucky, I wish that it wasn’t that way.”
Eaqub says those concerns appear to be becoming more widespread in New Zealand – and are contributing to shifting political consensus that the housing market must change.
“This need to help your children means people might be working longer, or living in debt longer, or retiring with debt,” he says. “People are working now not just for their own retirement, but also to help their children buy their homes. There are all sorts of implications in that – it’s like a Ponzi scheme, right? You might be able to help your children – but then how do your children save up enough to help their children?”
“I think it’s appalling, it’s frightening,” says Pauline. “I come from a generation where [among] our parents, working-class families could buy a home,” she says. “Now we worry about our grandkids, what will happen to them.”
*Olivia and Pauline are referred to by their first names only to protect the privacy of their families.
