Investment property still number one for returns

While residential rental property remains the highest ranked asset class, it dropped four points to 20%. The big change in the first quarter was managed funds, up seven points to 16%.

This uplift in support for managed funds comes on the back of strong recent investment returns and news that the tax treatment for funds will change next year. “The last few months have seen an increase in confidence amongst people invested in managed funds, and rightly so,” ASB Investments head of investment services Jonathan Beale says. “The New Zealand dollar began its drop against major currencies in the last quarter, while local and international equities performed well, increasing the desirability of managed funds.”

“The interest rate increases from the Reserve Bank pushed mortgage rates up, while median house price growth slowed, and the number of days to sell a house increased, impacting the yields and capital gains for rental properties,” Beale says.

When splitting investors by region and asking them what investment gives the best return between residential rental properties and managed funds, there were some interesting results.

“While investors in the upper and lower North Island mirror the overall results in the report closing the gap in confidence in residential rental property and managed funds, South Islanders have completely changed their stance, with managed funds now by far the preferred investment to get the best return.”

“It is unclear at this stage what is driving this change in confidence. South Islanders have typically been more conservative when it comes to investment returns, but the change in confidence this quarter has been surprising.”

Overall investor confidence has fallen to its lowest point since the first quarter in 2003.

“A more pessimistic outlook from investors is probably a reflection of the general market sentiment that we are experiencing a slowdown in the economy,” Beale says.

However investors still remain confident with their current main investment.