Investors upbeat on recovery hopes but Auckland lags- ASB

Confidence among New Zealand investors continues to improve from its 2020 lows as a buoyant housing market, low interest rates, and a strong share market recovery boost sentiment, ASB says.

The latest ASB Investor Confidence Survey shows net investor confidence (the difference between those that think investment returns will improve versus worsen in the coming year) has lifted from-11 per cent in the third quarter of 2020 to +2 per cent for the three months to December.

“It’s great to see confidence recovering, which is understandable given things are going so much better than we expected only six months ago,” ASB senior economist Chris Tennent-Brown said.

“Financial markets are performing well, and that’s having a positive impact on investments like KiwiSaver and managed funds, as well as direct investments in the sharemarket.”

However, all of this was being tempered by concerns about low bank deposit rates, the high valuation of property and shares, and uncertainty around Covid-19, said Tennent-Brown.

The housing market’s strength was reflected in the latest survey, with 25 per cent of respondents ranking the family home as providing the best return on investment – a record high.

Meanwhile views on rental property providing the best return remained flat for the third consecutive quarter.

This was likely due to the significant changes impacting landlords, making owning and running a rental property a more serious business, Tennent-Brown said.

“This goes back to the LVR restrictions which were implemented in 2013, as well as several changes introduced by both the National and Labour-led Governments.

“These are all challenges for property investors, which appear to be offsetting the confidence we’d expect to see from the general buoyancy in the housing market, and impacting return expectations.”

Confidence in housing was split by region, with 27 per cent of those outside of Auckland viewing the family home as the best investment, compared with just 21 per cent of those in Auckland.

Aucklanders were less optimistic than elsewhere, with confidence at net -7 per cent compared with +7 per cent for the rest of New Zealand.

The survey showed general confidence was lower among those over 60, with those under 30 the most optimistic.

“Generally those over 60 tend to have more income-focused investments, including term deposits, whereas the majority of under 30s are invested in KiwiSaver funds are likely to be the significant investment asset, and their own home if they have managed to get on the property ladder,” Tennent-Brown said.

“It’s understandable they’re feeling confident given that KiwiSaver balances have recovered to pre-Covid levels, as well as the current strength of the property market and benefits of low borrowing costs.”

But uncertainty around Covid-19 continued to affect overall sentiment.

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