By Alex Tarrant
Finance Minister Bill English does not think the property market is returning to bubble territory, and is welcoming signs investors are turning back to property if that leads to more new house builds.
The latest quarterly ASB Investor Confidence Survey released today for the March 2012 quarter showed rental property returned to top spot as the investment believed to offer the best returns for the first time since the start of 2010. Rental property replaced term deposits, which fell to second place above managed investments/superannuation, KiwSaver, public shares, and bank savings accounts.
The ASB Investor confidence index climbed 7 points to a net 12 percent in the three months to the end of March 2012. ASB Head of Wealth Advisory Jonathan Beale said this showed a turnaround in investor attitudes from late 2011, when the December earthquakes in Christchurch and the looming crisis in Europe threatened to topple the local recovery.
“Following the turbulence at the end of last year, 2012 started with a bang, with investor confidence climbing each month until April. However in recent weeks Greece is back in the headlines as the crisis continues to escalate, and question marks remain about whether this new-found investor confidence will last," Beale said.
“Kiwis’ enduring love affair with rental property has rekindled after 24 months in the cold. A total of 19 percent of investors now believe rental property offers the best returns, rocketing up from 14 percent last quarter. Meanwhile, Term Deposits have taken a 3 point tumble to second place at 16 percent,” he said.
“Our third ranked investment class is most intriguing, however. Managed Investments and Superannuation have soared 4 points to 13 percent, their highest level in four years. Shares have also been climbing every quarter since Q3 2010, now fourth equal with KiwiSaver which is steady at 10 percent. Bank Savings accounts are last at 8 percent.
The low interest rate environment seemed to be influencing investor perceptions markedly.
"Investors appear to be moving away from the traditionally lower risk investment options and searching for those with the potential for higher returns. This is a turnaround from the flock to caution we saw in the midst of the financial crisis, but unsurprising after the performance of share markets and managed funds as markets improved in the first few months of 2012," Beale said.
Good if it means more houses built
Finance Minister Bill English told media in Parliament Buildings on Tuesday that rising investor confidence in the property market was a good sign if it meant more houses were built. He said there was no risk, however, of people getting carried away like in the previous decade.
“You’ve got people out there faced with very low interest rates on their deposits, uncertainty generated by this news from offshore, and in the property market house prices have actually been relatively flat for three or four years," English said.
“We actually do need the property market to pick up because there hasn’t been enough new building to keep up with the demand. You’re going to see a big push in Christchurch, you’re seeing some pressure in Auckland pushing rents up," he said.
"You want it back to normal. If that lifts peoples’ confidence a bit, then that’s ok."