Rental property most popular investment class for Aucklanders, term deposits most popular everywhere else

Rental property most popular investment class for Aucklanders, term deposits most popular everywhere else

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 here on the ASB  Investor confidence survey.

See our interactive chart below on median rents.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

24 Comments

Comment Filter

Highlight new comments in the last hr(s).

"ASB's survey is based on 720 online interviews with adults aged 18 years and older throughout New Zealand." And we have a total polulation of 4,400,000.... Now that's what I call extrapolation!

Some guy called Tony is running around the ASB offices, shrieking with glee.

What investments do I prefer?

A. Equities

B. Commercial property

C. Bonds

 

Best advice I ever heard about investing on the share market?

When your taxi driver starts talking about his stock investments, it's time to quit the market. 

You could apply that advice to rental properties too.

With any investment, if your taxi driver is talking about it get out.

 

The best investments are ones that the majority of public do not know about.

Our tax system means that property investment pretty well always be the best investment.

Being able to claim the costs of your investment, but then pay no tax when you sell it - unless you have been particularly stupid.  Its a no-brainer, really.

No wonder we are such a debt-ridden society - our system rewards debt.

& no wonder the quality of NZ houses is deteriorating so quickly  - a report I read this morning but cant remember where.  I bet that this is correlation with the burgeoning number of rentals. 

The proportion of houses that are rented has gone up from about 25% to about 33% in the last 10-20 years.  & how many landlords care about keeping the rentals up to scratch?

A bit depressing, really

Cheers to all

It's not the tax system.  Tax is paid on net profit not gross profit but so what - every other business is the same.  Tax isn't paid when business is sold (unless the business is selling property) just like any other business that is sold.

It's the ability to gear it (with a percieved low risk) that makes it attractive.  There's no way anyone will lend you 5x or 10x your capital to buy shares or invest in the latest Hanover/Bridgecorp or whatever.  Shares don't seem to be taken as seriously as collateral for some reason.

...... and the answer is PROPERTY TAX ON THE LAND COMPONENT of residential property to the tune of 1 % pa ... this will keep a lid on property prices and replace some of the lost taxes over the years due to the tax structure and the rorts taken by the PI sector.... and before all you property spruikers say I am just rental scum, what would I know?, I am  both a landlord and renter and can see both sides of the fence.

Anyone asking to slap them with more tax to pay must be crazy. Why is it so hard to understand that the less tax we pay the less money is wasted and the better off we are?

Alex13 ... with all due respect, the problem we have is that for most PI's it is just one big tax rort on the back of now cheap money....many NZers are just not paying their share, usually the same ones that go on about dole bludgers etc etc

With the above, all we are doing is hollowing out our society into 2 groups ...the "haves" and the "have nots" while the real earners of our economy say stuff this and skip across the Tasman.

Economically, what a great place to be !! ... NOT.

 

Bollocks. Those who invest in shares, keep them for a while and sell them off at a profit do not (and should not) pay capital gain tax. Those who invest in a property, keep it for a while and later sell the property should not pay capital gain tax either.

As to "haves and have nots", welcome to capitalism mate. Imagine an experiment: one day all the wealth of a given country is equally distributed amongst every resident; will the residents be still equally wealthy in a decade? Of course, not!  - Unless we deviate from capitalism to another socio-economic framework, but those attempts have not been successful so far... 

Anybody who buys and intends to sell for a profit should be paying tax.  It's written in our income tax legislation - the issue here is that authorities are slack in enforcing the rules.

The issue with the property rort is that it is not a "normal" business and therefore, should not have "normal" business rules applied to it. 

Anybody in the normal course of business (manufacturing widgets, selling widgets, etc) is intending to actually make a profit after deducting expenses.  The owner would like the net result to be equal to a liveable salary/wage or more.  They would also like a profit to occur in the earliest years of trading otherwise they fold.  How many PI's even make a profit let alone one that is equal to a liveable salary?

 

MEH:  why should the so-called "intent" be relevant?  When they introduced a CGT in Canada, the PM there said "a buck is a buck is a buck".  That is, if you make profits or income thru whatever form, it should be taxable. 

Why not treat rentals as a "normal" business?  Property investment dominates NZers investment portfolios, so it leaves a huge gap in the tax system.

As for the last point, of course the object with the taxpayer funded rort is to lose money that is claimable, & then make a nice chunky tax-free gain at the end. 

What a sweet number!  No wonder NZ is going to the dogs.

Cheers to all

Philly, the "intent" shouldn't be relevant but that is how our existing tax law defines whether something is a capital gain and therefore non-taxable. 

Rentals are being treated as a "normal" business but the "rental/PI" industry is inherently different from any other "normal" business.  Re read my original post re profits.  PI already leaves a huge gap in the tax system.

My advice on share investing was if I traded more than 30 times in a year was  liable for tax on gains,of course offset by loss deals.Was the tax department mis advising?

Not so much mis advising but maybe taking advantage of your limited knowledge in this area of tax law.  You could be considered trading in shares if you only traded 5 times a year - the total number of trades is only one part of the overall scenario.  Tax law is iniatially based on the original intent when the investment was purchased.  The tax department and taxpayers then have to prove to each other what the original intent was and subsequent transactions/evidence and the interpretation of same may either prove or disprove the original intention. 

If you can prove that the 30 trades in a year was a one off incident (depends on the reason/s) or a necessary restructuring of your portfolio then you could argue that any gains are non-taxable.  Of course losses will be non-deductible as well.  If you are consistently trading in shares whether it be 5 or 30 a year then it's quite possible you are trading in which case you are taxed accordingly.

It is one of those grey areas that can only be dealt with on a case by case basis and further highlights what a patchwork quilt our tax legislation has become.

Alex13 ... you didn't even read my post properly . I said "land tax",  not capital gains tax. 

 

Suggestions to introduce or increase any tax are just crazy,

Alex:  I could point out that it is about the distribution of the tax burden, not the total tax take.  However, I guess that would be like preaching Darwin to a creationist. 

Cheers to all. 

.

The Green Party has released its alternative budget calling for an earthquake levy, capital gains tax and reduced spending on roads.

http://www.nbr.co.nz/article/greens-offer-alternative-budget-nn-93222

 

In theory, I should therefore vote for the Greens, on the basis of introducing a sane taxation policy.  Unfortunately, the Greens are ultra-lefty with their social policy, & don't suit a middle-of-the-roader like myself.  A pity, as I am also on their side with a number of environmental issues.

Cheers to all.

More tax and spend.

If I cant make ends meet at home the first step is to pull my horns in spending-wise. As a nation we havent even scratched the surface in this regard.

What are they going to spend this $ 6-7bn a year that they are saving/raising on ?

Suggestions of more tax - land tax, capital gain tax, any tax - are just crazy. THE LESS TAX WE PAY THE LESS MONEY IS GOING TO BE WASTED - FULL STOP. The less tax we pay the better off we are. Tax should be minimized to cover the absolutely necessary public spending and not more. So, reduce both the Govt spending (to what is absolutely necessary) and the taxes too; promote personal responsibility; discourage reliance on state handouts; encourage productivity; endorce success. THEN this country will become a nice place to live again, with incentives to do more, earn more, have more and enjoy more. (THEN housing will become "affordable" too).

Why the fixation with cgt? It is clear that farming / residential investment is a poor investment, relying on any cg at disposal, together with reducing assessable income in the intervening years. This has lead to distortions in asset prices. Why does taxation have to be so complex? Tax all gains as revenue, theeby reducing the tax impost on paye earners and businesses to say 15% f€£€^ we may as well go back to cash based accounting. The accruals rules are a waste of space in this country and are seriously penalizing entrepreneurial endeavor to the benefit of landlords and farmers. Our markets are nuts!