Property investment loses appeal, except in Auckland

Tuesday 31 July 2012

Housing is no longer the investment of choice for investors surveyed by ASB - except in Auckland.

By The Landlord

The latest ASB Investor Confidence Survey shows investors are becoming more cautious because of the looming crisis in Europe.

But while term deposits beat housing as the best investment throughout the rest of the country, the survey showed Auckland investors were still firmly in the thrall of their love affair with property.

ASB Head of Wealth Advisory Jonathan Beale said: “The ASB Investor Confidence Index slid four points to a net 8% over the three months to the end of June, with spooked investors wary of the potential for disruption in Europe. In June alone, investor confidence plunged 12 points to hit zero, the lowest level in three years.

“Over the quarter Greece held two separate elections and narrowly avoided expulsion from the Euro.  Although the situation in Greece appears to have stabilised following the June 17 election, concern about debt levels in Spain continues to rise. Investors appear to have taken this news to heart, with more believing returns will worsen over the next 12 months.”

Canterbury bucked the downward trend, however, with confidence in the region lifting six points over the survey period.

“Cantabrians are seeing early tangible signs that the rebuild is under way, and activity increased in the early part of this year, boosting investor perceptions.”

Term deposits are back in the top spot as the investment seen as giving the best return, up four points to 20%. Rental property slid two points to 17%.

Beale said: “The uncertainty in Europe appears to have re-ignited a flock to caution among investors, with more looking to the traditionally lower-risk option of term deposits as their investment of choice.”

But he said the situation in Auckland was quite different, where almost a quarter of those surveyed said rental property offered the best returns, compared to 21% who opted for term deposits.

“We appear to be climbing back to the dizzy days of Auckland’s property love affair, with more investors in the city looking to the housing market for the best returns.

KiwiSaver rated third overall at 12% as the investment that offered the best returns, largely driven by older respondents.

“We saw a sharp spike in the popularity of KiwiSaver among those aged over 60 years, from 8% to 18%. Eligible investors would have been able to access their funds for the first time on July 1, shortly after the survey period, potentially increasing their confidence in KiwiSaver returns.”

Managed finds were fourth, bank savings accounts fifth and shares sixth.

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