In this column in October 2003, I suggested that too many people approaching retirement were being far too dependent on releasing equity in their homes to meet their retirement income needs.
At the time, we were experiencing a property boom, with prices increasing as demand was outstripping supply.
This continued to a peak in 2007.
According to the website, unconditional.co.nz, the peak 12-month period for house sales over the past few years was 121,777 in the period ending April 2004.
In contrast, the lowest annual period for house sales (from the same website) for the past 18 years was the 12 months prior to February 2009 at 53,540.
It also advises that traditionally February is the month when 8.9% of annual sales occurred in New Zealand, the third most active month behind March and November.
In February this year, only 5029 houses were sold in New Zealand.
In 2003, I commented that 20% of the workforce was about to retire in the next 10 years.
Seven years on it would appear that it is beginning to happen.
In February this year, there were an additional 15,000 houses added to the for-sale lists.
According to the website, realestate.co.nz, there are 120,000 listings in New Zealand.
These figures suggest that it will take more than 12 months for sales to reduce the numbers.
Supply has swung back the other way from 2003, as demand is now lacking.
House prices may have to reduce to meet the lack of market demand and the Government's proposed tax changes on residential rentals could cause greater listings.
The opinion article in the Otago Daily Times by Peter Lyons on March 16, 2010 says it all: "The process that created the good times can be very brutal in reverse".
There are more factors involved than persons retiring causing the increase in listings.
The economy is quite fragile and there have been many job losses.
The affordability of mortgages on properties purchased in boom times can be difficult to service especially with the job market being uncertain.
Many persons who considered selling last year have held off until now to list.
Also, the possible tax changes to residential rentals appear to have tipped many landlords into thinking they should downsize their total holdings.
This is my opinion based on the observed increase in for-sale signs that have appeared this year in areas of North Dunedin I travel through every day.
Is Dunedin's rental market oversupplied given the usual full-page advertisement of to-lets each Saturday in the Otago Daily Times?It comes back to the same comments of 2003 that New Zealanders are still not saving enough.
The dependence on equity in property is too narrow a view for retirement saving.
KiwiSaver has begun to make a difference with $5 billion already saved. The amount of $5 billion saved in 2 years is brilliant.
Think of what could have been achieved if the New Zealand Super scheme of 1974 had survived without political interference.
The New Zealand Superannuation Fund has returned to profit over the past 12 months despite the decline in Telecom's share price.
It has $15.9 billion and grew at 17.4 % in the year to end of February.
Many people's excuse for not joining KiwiSaver is the lock-in requirement.
This is misleading, in that all providers have almost identical unit trusts and super schemes available operating in parallel with their KiwiSaver schemes.
If savings are begun early enough, there will be sufficient funds in retirement without relying on the equity in property.
A saving of $100 a month over 20 years at a modest 5% is $41,200 for $24,000 paid. Inflation-adjusted savings over 30 years or longer will provide adequate supplementary savings.
There is no official retiring age in New Zealand, but the pension paid at age 65 will need supplementing from 2015 onwards, according to the Todd report of 1991.
This is the purpose of the New Zealand Superannuation Fund.
The pension level does not fund a lavish lifestyle.
The more you can save the better, especially as the population is living longer and it is likely the age for entitlement to the pension could be extended to 67 or even 70 in the next few years.
• Peter Smith is a certified financial planner and is the principal of Peter Smith Financial Services Ltd Dunedin. A disclosure statement is available on request and free of charge. Email finance@petersmith.co.nz
