Term deposits have pulled well ahead of rental property as the most popular form of investment, according to ASB's third quarter investor confidence survey.
ASB says 20% of respondents now view term deposits as providing the best return ahead of rental property and bank savings accounts, which came in second equal with both registering 14% support.
Since the ASB survey began in the first quarter of 2006, term deposits have only ever scored higher, 21%, in the third quarter of 2008. The highest support registered for any asset class was 22%, for three consecutive quarters for rental property in 2007.
“Before the financial crisis, term deposits languished well below rental property as the investment that offered the best returns," said Jonathan Beale, ASB's acting general manager of private banking and wealth management.
"However, over the past two years the two investment classes have had more mixed fortunes. Intense competition in the market for term deposits is also likely to be having an upward impact.”
The major banks are aggressively chasing retail term deposit money given the Reserve Bank’s introduction of the core funding ratio (CFR) on April 1. The CFR sets out that banks must source at least 65% of their funding from retail sources and bonds with durations of at least one year. The central bank wants to increase the CFR to 75% by mid-2012 to offset New Zealand banks previous reliance on international wholesale, or 'hot' money, markets.
Based on the banks latest general disclosure statements, covering the three months to June, ASB grew its term deposits by more than any of the other banks, adding about NZ$400 million.
Meanwhile, Beale said support for rental property remained at its lowest level since late 2002, indicating investors might be opting for "more certainty" in their investment choices.
“Last quarter we saw rental property drop three points in popularity to 14% following the (Budget) changes to tax on property," said Beale.
"Property prices also remain flat across much of the country so investors may well be feeling cautious about the returns offered in the post-recession housing market.”
In terms of other forms of investment surveyed, support for managed investments rose to 11% from 10%, KiwiSaver was unchanged at 9% and support for shares in public companies fell to 5% from 8%.
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