Disclaimer:
The information on this website is for general guidance only and does not constitute financial or investment advice. Always do your own research and seek personalised advice from a qualified financial adviser or mortgage adviser before making financial decisions. All investments carry risk and past performance is not indicative of future results.
Key Takeaways
- Short-term market drops can reduce your deposit right before buying.
- Balanced or growth funds carry higher volatility risk.
- Defensive or conservative funds generally hold fewer growth assets, which can reduce volatility but may also reduce expected long-term returns.
- Review your fund choice before you expect to withdraw, and get provider or licensed-adviser guidance.
- Confirm changes with your provider or adviser.
For many first-home buyers in New Zealand, KiwiSaver can be an important part of the deposit. But if you plan to withdraw soon, fund choice and market volatility can affect the amount available when you need it.
What is Market Volatility?
Market volatility refers to how much and how quickly the value of investments goes up and down. When financial markets experience large and unpredictable price swings over a short period, that's volatility in action. Volatility is a normal part of investing, but when you are about to withdraw funds for a home deposit, a fall in value can reduce the amount available at an awkward time.
For example, a Balanced or Growth KiwiSaver fund might see strong returns over the long term, but in the short term it's subject to sudden drops in value due to market conditions. If your balance falls shortly before pre-approval, deposit payment or settlement, you may need to reassess your deposit, loan amount, timing or cash buffer.
Why First Home Buyers Need to Be Cautious
KiwiSaver may be one of the largest deposit sources a first-home buyer has. If you plan to use those funds soon, your investment timeframe is short. In that context, a market downturn may affect your deposit percentage, lender assessment, cash buffer or settlement plan.
The Risk is Real
For example, a 10% fall on a $40,000 KiwiSaver balance would reduce the balance by $4,000. The practical impact depends on your wider deposit, loan approval, contract dates and cash buffer.
The Conservative Fund Strategy
If you expect to buy your first home soon, review whether your KiwiSaver fund still matches your timeframe and risk tolerance. Sorted says fund type should reflect timeframe and attitude to risk, and FMA highlights the risk of being in a higher-risk fund when money is needed for a first-home withdrawal.
- Lower volatility: Defensive or conservative funds generally hold fewer growth assets than balanced, growth or aggressive funds, so they may have smaller ups and downs.
- Trade-off: Lower-risk funds may reduce volatility, but they can also have lower expected long-term returns. The right choice depends on your timeframe and risk tolerance.
- Planning clarity: A fund with smaller ups and downs may make deposit planning easier, but no fund removes all risk or guarantees a balance.
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Real-Life Example
As a simple illustration, if you have $40,000 in KiwiSaver and the balance falls by 10%, that is $4,000 less available before withdrawal. If you are relying on that balance for a deposit or settlement buffer, talk to your lender, solicitor and provider before committing to deadlines.
A lower-risk fund may reduce the chance of a large short-term fall, but it does not guarantee a specific balance or return. It may also reduce potential growth if markets rise.
Scenario example: Starting balance $40,000. A higher-risk fund could fall more sharply before withdrawal; a lower-risk fund may fall less, but the actual result depends on market conditions, fund settings, fees and timing.
When to Consider the Switch
- Before you need the money: If you are seriously shopping for homes or preparing for mortgage pre-approval, review your KiwiSaver risk level before you are locked into a settlement timeline.
- After talking to your provider or adviser: Speak with your KiwiSaver provider or a licensed financial adviser before making changes, especially where the decision affects a deposit deadline or retirement savings.
Other Tips for KiwiSaver First Home Buyers
Apply for a KiwiSaver Withdrawal Early
Once you have a signed sale and purchase agreement, ask your provider and solicitor what documents are needed and how long the withdrawal process may take. Do not leave provider checks until the last minute.
Check Your Eligibility
IRD says you must be in KiwiSaver for at least three years before withdrawing funds for your first home.
Consider Increasing Your Contributions
If cashflow allows, additional KiwiSaver contributions or voluntary payments may increase the amount available for a first-home withdrawal. Check your budget, government-contribution settings, employer process and provider rules before relying on extra contributions for a purchase date.
Don't Let a Market Dip Ruin Your Deposit
KiwiSaver can help eligible buyers get onto the property ladder, but timing and fund risk matter. If you plan to use KiwiSaver as part of a deposit, review whether your fund type still fits your withdrawal timeframe and risk tolerance.
Market volatility is one risk to plan for early. Your provider, solicitor, lender and a licensed financial adviser can help you understand how fund choice, withdrawal timing and settlement deadlines fit together.
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