Investor confidence in the residential rental property has fallen, according to the latest ASB Investor Confidence Report.
When asked “What type of investment gives the best return?” investor who believed the residential rental property market gives the best return fell by 4% to 20%.
However, according to the report, the residential rental property remains the highest ranked asset class.
ASB Investments head of investment services Jonathan Beale said the fall of residential rental property is due to the interest rate increases from the Reserve Bank which pushed mortgage rates up.
At the same time, Beale said median house price growth slowed and the number of days to sell a house increased, impacting the yields and capital gains for rental properties.
The report also asked investors how confident they are in their current investments, of those surveyed, 60% said they were confident in the residential rental property market, down 1%.
Meanwhile, investors who believe their investments will perform better this year than they did last year, fell 9% to their lowest point since the first quarter of 2003.
"We have been surprised in previous reports with the levels of optimism amongst investors for even higher returns than they have seen in recent years.
"A more pessimistic outlook from investors is probably a reflection of the general market sentiment that we are experiencing a slowdown in the economy. The double digit performance seen in many asset classes over the last few years couldn’t go on for ever,” Beale said.
According to the report, the managed funds sector has soared out of expense of the residential rental property market.
Investors who believe managed funds will provide the best return were up 7% to 16%.
Beale said the last few months have seen an increase in confidence amongst people invested in managed funds, and rightly so.
"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 performance of ASB’s Balanced, Growth and Dynamic Strategy Funds, which have exposure to both local and international equity markets, reflects the type of performance that appears to be attracting investors. The Balanced, Growth and Dynamic Strategies returned 5.45%, 7.01% and 9.94% respectively for the period,” he added.
In addition, investors who are confident about their own investments in managed funds surged up 18% to 57%.
Beale said the jump in confidence for people with managed funds is warranted as, in general, managed fund performance over recent times has been very good.
“This measure does tend to fluctuate over quarters as performance ebbs and flows, but reinforces the adage that with managed funds it is time in the market, not timing the market that provides good performance.
"At the moment the difference in confidence between people who use investment adviser (42%) and those who don’t (32%) is relatively static. It is likely to change in favour of those using investment advisers as market conditions become more difficult, and with changes to tax around investments and regulation,” he added.
By Kathryn O’Meara
