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Investor’s confidence bouyed by strong housing market

Investors’ confidence in future returns has been pushed up by perceptions of a strong housing market says Roger Perry, chief manager, ASB Bank Investments.

Friday, January 31st 2003, 11:01AM

Investors’ confidence in future returns has been pushed up by perceptions of a strong housing market says Roger Perry, chief manager, ASB Bank Investments.

The results released in the latest ASB Bank investor confidence survey for the December 2002 quarter reveal that overall confidence is up by 6% on the previous quarter to a net 18% positive.

Residential rental property moved into first place as the investment that is viewed as giving the best return, for the first time since 1999—16% of respondents believe residential rental property investment will give the best return, up from 13% last quarter. This was followed by term deposits which nearly doubled to14% of investors believing they provide the best returns, and managed investments also up slightly to 14%.

Those with their main investments in residential rental property are particularly optimistic with a net 32% expecting a better return from their investments this year.

Perry says the increased confidence for residential rental property as an investment has taken a while to filter through from what has been a strong housing market over the last 12 months.

“It signals that more people could consider investing in residential rental property in 2003, particularly with the likelihood of the strong housing market continuing its run this year.

“Continued high migration is likely to be another factor in the preference for residential rental property. Although the Government recently tightened the entry criteria for migrants, there is still a back-log of applicants who will flow into the country in 2003.

The improvement in confidence in term deposit returns was particularly strong amongst respondents with their main investment in term deposits. From an all time low of a net 27% expecting a better return on their investment last quarter, this group’s confidence jumped to a net 58% this quarter.

“The increased faith in term deposits is a likely result of the strength of the New Zealand economy over the last 12 months and consequently high interest rates by international standards. The Reserve Bank has signaled the possibility of lower interest rates later this year and this may dent confidence in term deposit returns in the next survey.

“While investors are confident overall, there remains some uncertainty about the global economic outlook and the prospect of war in Iraq. The risks to investors from both these factors appear to have diminished in recent months, while New Zealand’s economy has remained strong. Therefore we can expect investors’ overall confidence to remain reasonably strong in the coming quarters.

he results come after ASB Bank’s release of its quarterly housing confidence survey which showed a ‘cautious optimism’ in the housing market.

RESULTS GRAPHS – ASB Bank Quarterly Investor Confidence Survey

What type of investment gives the best return?
ASB Bank Investor Confidence Survey

The ASB BANK Quarterly Investor Confidence Survey is a nationwide survey, which has been undertaken every quarter since May 1998 interviewing a sample of up to 1000 respondents.

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