Property holds allure despite low returns

It also defies the low cash returns from high-priced property investment, where rents have not risen nearly as much as property prices in the past four years.

The survey of up to 1000 investors showed residential rental properties remained the asset type most widely expected to provide the best return over an unstated time period.

Confidence in property was 2 per cent higher for the third quarter of 2005 to a net 23 per cent - the number of investors expecting property to deliver the best returns, minus those who do not.

"This result flies in the face of continued speculation that the housing market is approaching the end of cyclical upswing," said James Mitchell, head of relationship banking and financial services at ASB.

Investors bought property for both rentals and capital gain, he said. Respondents might have bought several years ago, rather than in the past three or four years.

Property investors who bought some time ago would have had strong capital gains in the past three years. Returns from rental properties depended on how much debt had been incurred to buy the property.

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