By Gareth Vaughan
Investor confidence is at its highest level since late 2010 with more investors backing rental property to offer the best returns than any other investment class, ASB says.
The bank's latest Investor Confidence Survey has its Investor Confidence Index up 5 points to a net 13 points over the three months to the end of September, its highest level since reaching 19% in the fourth quarter of 2010.
Jonathan Beale, ASB's head of wealth advisory, says the survey shows rental property back at high confidence levels in New Zealand with a 5% rise in confidence outside of Auckland especially notable. And in Auckland, investment property's popularity has continued its upwards trajectory with a quarter of respondents considering property likely to offer the best returns over the next 12 months.
“Confidence in investment property among Aucklanders is now at levels not seen since 2009,” says Beale. “Auckland investors appear to be particularly optimistic regarding the opportunity for capital gains on property and are adjusting their investment strategies accordingly."
This comes with the average price of a house in Auckland topping NZ$600,000 for the first time in October, according to the city's biggest real estate agent Barfoot & Thompson. The latest data from government valuer Quotable Value shows national residential property values in October were 1.1% above the late 2007 peak with the average current value at NZ$420,048. National values rose 5.7% in the year to October and 10.7% in the old Auckland City, QV says.
And the Real Estate Institute of New Zealand said last week national house sales volumes rose 32.6% in October year-on-year and the median house price increased NZ$9,000, or 2.4%, from September to a record high of NZ$380,000.
Property first, shares last
Rental property came in first with those ASB surveyed with 18% believing it gives the best return. This was up from 17% from the second quarter. Second were term deposits at 17%, down from 20% and first place last quarter. Managed investments/superannuation was third with 12%, KiwiSaver fourth with 11%, bank savings accounts were fifth with 9%, and shares last of the big six categories at 7%.
Beale says the continuing strength in investment property and lift in managed investments seems to have come at the expense of less risky investment classes such as terms deposits.
“There are early indications that previously defensive investors are gaining more of a risk appetite and are starting to focus on higher potential yields instead of defaulting to the more secure options for their money,” says Beale.
However, the survey results show investors wary of the sharemarket with just 7% of respondents expecting the sharemarket to offer the best returns over the next 12 months.
“New Zealand investors are continuing to look at the sharemarket as a whole as the least attractive investment option, which is at odds with the broad public interest shown towards some recent blue-chip investment offerings. Investors’ cautious view of the sharemarket may largely be due to a historical perception of relatively high risk levels. Investors still appear to prefer the security of managed funds over a self-managed share portfolio, even in an environment where risk is becoming more palatable," Beale says.
Investors 'less risk adverse' with global economy 'settling'
Overall Beale says investors are feeling more confident and less risk adverse against a backdrop of a "settling" global economy and the on-going post earthquake Christchurch rebuild.
“The European Central Bank’s actions and the stable outcome from the second Greek election have reduced the number of bad news stories that were dominating the media earlier in the year and this appears to have improved the attitude and outlook for New Zealand investors,” says Beale.
“The return of investor confidence to its highest levels since the end of 2010 indicates that investors are taking a less defensive stance and considering the benefits of higher risk and higher yield investment classes.”
The survey results are based on 786 online interviews with people aged 18 years and older across New Zealand.