Property investment running hot

By JIM EAGLES business editor

Kiwi investors' love affair with property is running hotter than ever.

The latest quarterly ASB Bank Investor Confidence Survey, released today, shows enthusiasm for residential rental property is at record levels, with residential property rated as the best investment by 21 per cent of those surveyed.

That is well above the next most popular investments, term deposits (favoured by 11 per cent) and bank savings accounts (12 per cent).

James Mitchell, head of relationship banking and financial services at ASB, said he expected the trend to property to last a while yet.

"Particularly as New Zealand's strong migration flows continue, interest rates continue to fall and supply continues to lag the demand for housing."

Those with their main investments in residential property were by far the most optimistic about the future.

A net 68 per cent expected to get better returns this year, the highest level of optimism recorded for any investment type in over three years.

That optimism contrasted with their view of managed funds, which was now the most negative ever, with 10 per cent of respondents thinking they would deliver the best returns.

Mitchell said the survey showed investors did not yet have confidence in managed funds and shares and that they still preferred the safety of leaving their money in the bank or invested in bricks and mortar.

However, overall investor confidence was improving, having risen 2 per cent since the previous quarter to a net 10 per cent positive.

"When combined with the passing of the Sars scare and the war in Iraq, and given that there are no more negative global events for a while, we should start to see a more positive attitude towards managed investments."

Positive returns had begun to flow back into managed funds over the past six months.

"For the more speculative investor timing is everything," Mitchell said.

"So over the next year we are likely to see more caution towards housing and perhaps more favour towards other forms of investment."