By Gareth Vaughan
Bank term deposits are the most popular investment product in New Zealand, except for Auckland where rental property reigns supreme, ASB says.
The latest ASB Investor Confidence Survey, for the first quarter, shows term deposits were rated the most popular investment across the country with 19% support, followed by rental property at 15%, with KiwiSaver and bank savings accounts equal third at 12%. Managed Investments/unit trusts/superannuation scored 10% support with shares in public companies lagging behind at just 6%.
However Jonathan Beale, ASB’s head of private banking and wealth management, said when Auckland is split out from the rest of the country, a "nation of two halves" emerges.
In the city of sails rental property is the most popular investment class with 19% support ahead of term deposits at 17%, with KiwiSaver third at 12%. Respondents to ASB's survey outside Auckland rated term deposits top with 22%, followed by bank accounts and rental property second equal but well back with just 12% support each. KiwiSaver was fourth with 11%.
'Relatively buoyant' Auckland property market
Beale said the popularity of rental property in Auckland could be due to several factors, including the "relative buoyancy" of the Auckland property market.
"However this popularity follows a flatter period which started a year ago, so time will tell whether this love-affair with Auckland rental property will continue, especially considering last year’s changes to tax on rental property, and forecast increases in interest rates," said Beale.
The latest statistics show the weekly median rent for a three bedroomed Auckland house is NZ$475 a week compared with the NZ$330 national median. The median rent for an Auckland apartment is NZ$375 compared with the national median of NZ$350.
The most recent Real Estate Institute of New Zealand house sale figures, for April, noted a new all time high median house price in Auckland of NZ$479,500 topping the previous high of NZ$477,000 recorded last November, whilst the national median house price fell by NZ$5,000 to NZ$360,000.
KiwiSaver popularity climbs as PM announces reduced government contributions
As for KiwiSaver, Beale said survey respondents expecting KiwiSaver to be their main source of retirement funding reached a new high of 62%, up from 61% in the fourth quarter of 2010, while respondents currently using KiwiSaver rose 5% percent to 43%, also a high. This comes on the heels of Prime Minister John Key saying last week that the government will reduce its annual matching tax credit contributions for KiwiSaver of NZ$1,042 per person.
“Over the past year KiwiSaver has climbed from last place to third equal in return perceptions, the highest level yet,” Beale said.
“After almost four years of contributions from individuals, employers and the government, investors are starting to sit up and take notice of KiwiSaver. Fund balances are growing, and the KiwiSaver Scheme has proven to be a successful way of turning around the poor savings habits of many New Zealanders.”
A total of 1.7 million people now have KiwiSaver accounts.
Despite the government's changes, Beale said ASB expects KiwiSaver to remain the most popular retirement savings vehicle for respondents to its investor confidence survey.
ASB's survey is based on 720 online interviews with adults aged 18 years and older throughout New Zealand. The bank said interviewing in Canterbury ceased during the period immediately following the 22 February earthquake and resumed towards the end of its tracking period.
See our interactive chart below on median rents.